RM10bill green sukuk in pipeline

By Farah Adilla - November 1, 2021 @ 9:20am

KUALA LUMPUR: Malaysia plans to issue RM10 billion of green sukuk next year, following the overwhelming response to its maiden US$800 million sustainability sukuk issuance early this year.

The RM10 billion would be channelled to social or environmentally friendly projects, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said today.

In tabling the 2022 Budget, Tengku Zafrul said earlier in April, Malaysia had successfully priced the world's first sovereign US dollar sustainability sukuk via the US$800 million 10-year Trust Certificates.

"The sukuk was oversubscribed by 5.6 times due to the overwhelming demand," he added.

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Putra Business School associate professor Dr Ahmed Razman Abdul Latif said the potential RM10 billion sukuk is more aligned to what has been outlined in the 12th Malaysian Plan (12MP) where the government is committed to championing the United Nation's 17 Sustainable Development Goals (SDGs).

"Therefore the impact on the economy will be more towards long term as government commitment to sustainability will give the right signal to foreign investors on Malaysia as the best destination for them to invest.

"I think the market will be very responsive to these green sukuk," he told the New Straits Times.

The Finance Ministry (MoF) reportedly said in April that the strong demand had also resulted in the lowest ever yield and spread for a US-dollar sukuk issuance by Malaysia, with the 10-year and 30-year Trust Certificates priced at 2.070 per cent (T + 50 basis points) and 3.075 per cent (T + 80 basis points) respectively.

More importantly, the MoF said this demonstrated the market's confidence in Malaysia's economic recovery and growth prospects, despite a challenging past year due to the Covid-19 pandemic.

Both tranches were assigned a rating of A3 by Moody's Investors Service and A- by S&P Global Ratings.

Malaysia's maiden sustainability sukuk is the world's first US dollar sustainability sukuk issued by a sovereign.

The proceeds will be used for eligible social and green projects aligned to the United Nation's Sustainable Development Goals (SDG) Agenda.