A new debt instrument linked to sustainable objectives has been announced, this time by Malaysia and within the framework of Islamic Finance.

It is the sustainability Sukuk, the first sovereign sustainability Sukuk issued in US Dollars, which will be used to finance eligible social and green projects in line with the United Nations Sustainable Development Goals (“SDGs”), helping Malaysia to meet its National Determined Contribution of the Paris Agreement. Its debut was so successful among investors that Malaysia has upsized its initial target from US$1 billion to US$1.3 billion, after oversubscription of 6.4 times[1].

Malaysia follows an international trend of debt instruments issuance related to SDGs, integrating the so-called green finance, with instruments such as green bonds, social bonds, sustainability bonds, and sustainability-linked bonds. Recently, Chilean company CMPC, from the paper sector, has issued its first sustainability-linked bond, raising US$500 million[2].

For a longer time, Brazilian companies have also been eyeing such investments. In 2015, the protein giant BRF was the first Brazilian company to issue a green bond, raising €500 million[3]. Suzano, also from the paper sector, was the first Brazilian company – and second globally – to issue a sustainability-linked bond in 2020, raising US$750 million, with oversubscription of 9 times[4].

As we have informed in our latest MENA Desk Newsletter[5], Brazil has begun discussing a legal framework to address Islamic Finance regulation. Therefore, new green Islamic Finance pathways could, hopefully in the near future, also be explored in the country.

Our Mena Desk and Environmental Teams is at your disposal for further clarifications.

Sincerely,

MENA Desk and Environmental