The Securities Commission Malaysia (SC) today launched the Sustainable and Responsible Investment linked (SRI-linked) Sukuk Framework (Framework) to facilitate fundraising by companies in addressing sustainability concerns such as climate change or social agenda, with features that relate to the issuer’s sustainability performance commitments.
With the accelerated shift towards developing a climate-resilient future, high-emitting industries are at a high risk of being phased out. The SRI-linked sukuk will enable companies in these as well as other industries to transition into a low-carbon or net zero economy. As at December 31, 2021, the global sustainable bonds outstanding exceeded USD1 trillion with sustainability-linked bonds making up USD118.8 billion [1].
The Framework is an extension of the initiatives under the SRI Roadmap that was introduced in 2019 to broaden SRI products offerings. More significantly, this initiative reflects the SC’s commitment to expand the reach of the Islamic Capital Market (ICM) to the broader stakeholders of the economy and build an enabling ICM ecosystem for the sustainability agenda.
The SC recognises that there are significant opportunities for the market to attract a more diverse issuer and investor base and undertake a wide range of sustainable projects.
The SC Chairman Dato’ Seri Dr. Awang Adek Hussin said, “The SRI-linked Sukuk Framework will encourage greater mobilisation of private sector and issuers’ financing towards sustainable development and meet the increasing global demand for sustainable financing. This is in line with the initiatives outlined in the Capital Market Masterplan 3 to reinforce Malaysia’s value proposition as the regional centre for Shariah-compliant SRI.”
Under the Framework, the proceeds raised can be utilised for general purpose, subject to the issuer committing to future improvements for sustainability outcomes within a predefined timeline, which will be monitored using key performance indicators (KPIs).
The financial characteristic or structure of the SRI-linked sukuk may be varied based on the success or performance of the issuer in meeting its KPIs and sustainability goals.
The Framework also provides greater transparency for investors by requiring issuers to appoint an external reviewer before issuance and an independent verifier postissuance to assess compliance with the framework and issuer’s sustainability performance which can be tracked by investors.
Further details of the requirements for the SRI-linked sukuk are set out in the Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework and the Guidelines on Issuance of Corporate Bonds and Sukuk to Retail Investors, which can be downloaded here.
[1] Source: Sustainable Debt Global State of the Market 2021, Climate Bond Initiative
About the Securities Commission Malaysia
The Securities Commission Malaysia (SC), a statutory body reporting to the Minister of Finance, was
established under the Securities Commission Act 1993. It is the sole regulatory agency for the regulation
and development of capital markets. The SC has direct responsibility for supervising and monitoring
the activities of market institutions, including the exchanges and clearing houses, and regulating all
persons licensed under the Capital Markets and Services Act 2007. More information about the SC is
available on its website at www.sc.com.my. Follow the SC on twitter at @SecComMy for more updates.
