Climate Bonds Initiative Report: Malaysian Sustainability Bond And Sukuk Market Currently At US$2.6 Billion

The Climate Bonds Initiative in support by HSBC has launched the ASEAN Sustainable Finance State of the Market 2020. The report highlighted that the ASEAN Green, Social and Sustainability issues reached a record a high of US$12.1 billion in 2020, a 5.2 percent year-on-year increase from US$11.4 billion issued in 2019.

The report noted that the Malaysian sustainability bond and sukuk market currently stood at US$2.6 billion. A total of 15 green bond, sukuk and loan deals have been issued by Malaysian entities with six occurring in 2019 and three in 2020.

One of the green deals which came to market in 2020 was the first ASEAN Green Sustainable and Responsible Investment (SRI) Sukuk worth RM260 million (US$61m) issued by Leader Energy, with HSBC Amanah Malaysia as Lead Arranger. The proceeds are to finance two solar photovoltaic power projects in Kedah which also marks Leader Energy’s debut project financing issuance in the Malaysian ringgit bond market.

2020 also saw a consistent increase of both instrument size and number of issuers which included 40 green products (21 bonds, 19 loans) issued in 2020, up from 31 in 2019. Additionally, green bond and loan issuers increased to 30 (15 bonds, 15 loans), up from 20 in 2019.

Last year also saw 26 debut issuers, with the majority from Singapore and four repeat issuers. Apart from Singapore, the ASEAN green loan market has seen two other issuers in the 2016-2020 period.

Furthermore, sustainability bond issuance reached an all-time high on US$2.9 billion last year, with six new deals coming to market driven by the demand for health services financing, as well as increasing efforts to meet the United Nations Sustainable Development Goals (UN SDGs) and poverty alleviation projects.

The report also highlighted that social bond issuance decreased 10 percent Y-o-Y to US$48.7 million in 2020 from three deals. Despite overall growth, the ASEAN social and sustainability bond markets are still at an early stage compared to other regions, constituting five percent of Asia-Pacific and one percent of the global markets.

“Government and regulatory policy shifts have had an impact and are vital to building regional capacity to meet the climate crisis and sustainable development goals. Institutional investors continue to seek quality green and sustainability based investments. This demand will grow throughout the 2020s,” said Sean Kidney, Chief Executive Officer of Climate Bonds Initiative.

Jonathan Drew, Managing Director of ESG Solutions , Global Banking, HSBC said through continued collaboration amongst the public and private sector, Southeast Asia will be able to channel the huge amount of capital needed to support sustainable growth.

The report further stated that the sustainable finance is set to underpin national recovery and stimulus plans to ‘build back better’ .

“ASEAN’s sovereign issuers club is set to expand with planned sovereign green bond issuance already announced by Singapore and Vietnam. Malaysia, on the other hand, sees a future role as an international centre for sustainable Islamic finance and green sukuk,” the report highlighted.

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