At the end of 2016, Malaysia’s local currency bond market, the 4th largest in emerging East Asia after China, Korea and Thailand, stood at 1.167 trillion Malaysian Ringgits or approximately $260 billion, of which 59% were Sukuk. Of the top 30 local currency corporate bond issuers, several were already funding projects that appear likely to be eligible for green status. While Malaysia already had guidelines for the issuance of SRI Sukuk, green bonds were unfamiliar instruments in Malaysia at that time, and there were no specific green bond or green Sukuk guidelines.
Recognizing the situation and the market opportunity, the World Bank coordinated the formation of a Technical Working Group with Bank Negara Malaysia, the Central Bank of Malaysia, and the Securities Commission Malaysia, the capital markets regulator.
In July 2017, Tadau Energy issued a 250 million Malaysian Ringgits green Sukuk to finance a 50 megawatts solar photovoltaic power plant. It was the world’s first green Sukuk and generated continuous publicity and attention on the new instrument.
Welcome to this case study, “Pioneering Green Sukuk: The Technical Assistance of the World Bank in Malaysia”, by Mohamed Rozani Osman, Senior Financial Sector Specialist, World Bank Group Inclusive Growth and Sustainable Finance Hub in Malaysia.