Putrajaya has priced the world’s first sovereign U.S Dollar Sustainability Sukuk, via the issuance of US$800 million 10-year Trust Certificates. The Government also issued a US$500 million 30-year Trust Certificates.
Both tranches have been assigned a rating of A3 by Moody’s Investors Service and A- by S&P Global Ratings.
According to the Ministry Of Finance, investors oversubscribed by 6.4 times and due to the demand, Putrajaya decided to upsize the initial target size of US$1 billion to US$1.3 billion.
“The strong demand has 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% [T + 50 basis points] and 3.075% [T + 80 basis points], respectively,” Finance Minister, Tengku Zafrul Aziz said.
Malaysia’s maiden Sustainability Sukuk is the world’s first U.S. Dollar Sustainability Sukuk issued by a sovereign, whereby proceeds will be used for eligible social and green projects aligned to the United Nation’s Sustainable Development Goals (SDG) Agenda.
“The issuance is not only a global first on many fronts, but also a strong recognition of Malaysia’s Islamic finance industry’s innovative capabilities in structuring sukuk to help advance Malaysia’s SDG-focused policies towards achieving our Shared Prosperity Vision 2030,” he said.
The allocation was well-spread globally, with 55 percent of the principal amount of the 10-year Sukuk distributed to investors in Asia, 33 percent to Europe, Middle-East and Africa (EMEA) and 12 percent to the United States, whilst 46 percent of the principal amount of the 30-year Sukuk was distributed to investors in Asia, 33 percent to EMEA and 21 percent to the United States.
CIMB, HSBC, and J.P. Morgan acted as the Joint Bookrunners and Joint Lead Managers on this offering. In addition, HSBC Amanah Malaysia and J.P. Morgan were the Joint SDG Structuring Agents.
“This milestone reinforces the government’s thrust on investing in sustainability and facilitating the transition to a low carbon future. Moreover, the issuance will bring the country a step closer to meet its ambitions as part of the Shared Prosperity Vision,” HSBC said.
The establishment of Malaysia’s SDG Sukuk Framework, which HSBC Amanah Malaysia was the Joint SDG Structuring Agent for, also provides an avenue for future Green/Social/Sustainability issuances by the government.
Commenting on the oversubscription by investors, the bank told BusinessToday the roadshow and investor engagement attracted high-quality investor demand across Asia, Europe, Middle East and the US thus reinforcing strong interest from ESG investors.
Bank Islam’s Chief Economist, Mohd Afzanizam Abdul Rashid said as ESG narratives become more mainstream, there is an urgent need to ensure that economic development and businesses alike would take into account a broader impact beyond the impact beyond the financial.
“We have seen the investment fraternity embark on such journey for quite a while now given that volatility and risks will continue to be prevalent.
“Therefore, ESG led investment is seen to be a paradigm on how investors should decide their investment and be able to earn returns that are sustainable for a long period of time,” he said.
He further highlighted that the move by Putrajaya goes to show that the authority is cognizant about the prevailing demand for sustainable investment especially when the sustainability narratives will likely to be the guiding principle for economic policies and development.
“Along the way, there will be projects or initiatives that ESG in nature and therefore, there will be a constant need for Capex to fund these projects,” he said.
