The Malaysia’s Islamic Financial Market Committee (IFMC) and the MIFC Leadership Council (MLC) convened an industry-led roundtable discussion on 19 August 2024. The discussion aimed at advancing the green funding ecosystem in Malaysia as a competitive destination for Shariah-compliant green investment and fundraising activities.
Malaysia continues to progress in Sustainable and Responsible Investment (SRI) sukuk with total outstanding SRI issuances approaching RM27.3 billion[1]. Malaysia accounts for 25% of the total issuance of ASEAN Green, Social, and Sustainability debt securities. Green sukuk is poised to support the Malaysia’s funding needs as Malaysia pursues catalysts projects under the National Energy Transition Roadmap. This is estimated to require up to RM1.85 trillion in funding by 2050. The roundtable discussion has reinforced commitment towards delivering actionable steps to scale up the green sukuk adoption in Malaysia, while strengthening enablers to elevate the industry as the global gateway for Islamic finance. This aligns with the Malaysia’s International Islamic Financial Centre (MIFC) priorities.
In sharpening the propositions for Shariah-compliant green funding ecosystem, the roundtable identified three key focus areas:
- Building critical mass by encouraging businesses and issuers to explore green funding through capital market solutions such as blended finance and smaller- ticket sukuk issuances.
- Strengthening collaboration with key stakeholders to activate market levers that will enhance the vibrancy of green funding The levers could include green asset pipeline and repository, strong carbon pricing and market, comprehensive disclosure and reporting practices as well as coordinated actions and targeted incentives in driving the market towards high priority areas in transitioning to a greener economy.
- Broadening the investor base and advocating for stronger institutional investors’ role in shaping the green investment landscape. This includes fostering stronger ties with multilateral development banks with aligned mandates and objectives.
Bank Negara Malaysia Deputy Governor Adnan Zaylani Mohamad Zahid in his welcoming remarks highlighted, “We need to expand and promote the use of green sukuk to finance a wider range of sectors within the green projects universe. We must also broaden our investor base by actively promoting green and SRI sukuk at every opportunity. This effort requires consistent engagement with potential investors and a substantial enhancement of our promotional activities.”
MLC Chairman Tan Sri Azman Mokhtar in his summary remarks said, “These discussions are in line with the MLC’s mission to convene, connect, provide thought leadership and catalyse change, furthering the MIFC’s goals. It is important for regulators, issuers, investors and financial intermediaries to come together and collaborate to solve the existing issues and challenges in the industry collectively, and in that regard, from the standpoint of MLC, we believe both as an article of faith as well as a market opportunity, the confluence of the ‘Three Greens’ – sustainability, Islamic finance, and financial returns – represents the path forward.”
IFMC Chairman Hanif Bin Ghulam Mohammed said, “As part of IFMC’s mission to deepen domestic Islamic financial market, we welcome industry’s collective commitment to scale up the issuances of green sukuk. The insights gained from this roundtable discussion will continue to drive support for domestic adoption of green sukuk in alignment with the nation’s ambitious shift towards renewable energy and sustainable infrastructure by 2050, whilst reinforcing Malaysia’s leadership in Islamic finance. IFMC will continue to drive innovative solutions and strategies discussed during the roundtable, working hand in hand with all stakeholders to harmonise economic growth through environmental stewardship emphasizing on ensuring long-term prosperity.”
Malaysia’s Islamic Financial Market Subcommittee
MIFC Leadership Council
26 August 2024
[1] Source: Securities Commission Malaysia