Capital Markets Malaysia (CMM), an affiliate of the Securities Commission Malaysia (SC), organised side events at the 2022 United Nations Conference of the Parties (COP27) held in Sharm El Sheikh, Egypt to showcase Malaysia’s experience in leveraging its Islamic capital market leadership.
With a view to attracting greater international participation in Malaysia’s capital market, CMM’s engagements at the Malaysia Pavilion was hosted by the Ministry of Environment and Water Malaysia, as well as the UNDP Pavilion hosted by the United Nations Development Programme.
Senior representatives from the SC and Bank Negara Malaysia, financial sector leaders from Bursa Malaysia, CIMB Investment Bank, Maybank Investment Bank and HSBC Amanah Malaysia as well as subject matter experts from the Sustainable Finance Institute Asia and Global Compact Network Malaysia and Brunei came together to showcase Malaysia’s experience in successfully harnessing Islamic finance to develop the country’s sustainable finance ecosystem.
The global Islamic finance industry, with total assets of US$3.06 trillion (as of 2021), has the potential to contribute significantly towards the existing funding gap in meeting the UN sustainable development goals (SDGs).
Malaysia’s SRI journey started in 2014 with the launch of the Sustainable and Responsible Investment (SRI) Sukuk Framework by the SC. This framework, a key driver in developing sukuk as an SRI asset class, has aided companies to raise funds for green, social and sustainability projects. Malaysia now leads in sustainability sukuk issuance in ASEAN with 56% market share of the total ASEAN sustainability sukuk issuance, as of November 2021.
A steady increase in SRI sukuk issuances continues to support many ESG-centred projects including solar photovoltaic power plants, green buildings, hydropower, and affordable housing, enhancing Malaysia’s transition to a low carbon economy.
This year, the SC launched the Sustainable and Responsible Investment linked (SRI-linked) Sukuk Framework to facilitate businesses in financing their transition towards achieving their sustainability targets. The framework also expands the suite of SRI products offered through the Malaysian capital market This is in line with growing global demand for sustainability-themed instruments such as sustainability-linked bonds.
By the end of the year, Bursa Malaysia will be launching the Voluntary Carbon Market (VCM) exchange. The Shariah-compliant VCM will enable Malaysian companies to purchase voluntary carbon credits to offset their carbon emission footprint and to support financing for projects and solutions that reduce, remove or avoid greenhouse gas emissions.
The presence of enabling regulatory structures and private sector initiatives, particularly for Islamic Sustainable and Responsible Investments, has allowed the SRI segment to flourish in the country. CMM continues to engage with key financial sector stakeholders in supporting the development of an Islamic sustainable finance and investment ecosystem.
