Welcome Remarks at the SC's NaviGate Capital Market Green Financing Series: SRI Sukuk and ASEAN-labelled Bonds
31 May 2021  |   By Datuk Zainal Izlan Zainal Abidin, Deputy Chief Executive, Securities Commission Malaysia
NaviGate Capital Market Green Financing Series:
SRI Sukuk and ASEAN-labelled Bonds
31 May 2021
Welcome Remarks (2.00 pm – 2.10 pm)
Datuk Zainal Izlan Zainal Abidin
Deputy Chief Executive, Securities Commission Malaysia

Assalamualaikum and a very good afternoon,

Ladies and gentlemen,

1. Welcome to the Securities Commission Malaysia's NaviGate: Capital Market Green Financing Series' second event.
2. The NaviGate series, which was launched by the SC earlier this year, aims to create greater awareness on Sustainable and Responsible Investment (SRI) through the various capital market funding avenues as well as to encourage greater connectivity between green and sustainability-focused companies and the capital market.
3. The first NaviGate event, held in February, focused on exposing the under-served segments - the micro, small and medium-sized companies, to alternative capital market financing. The event was well received, with about 100 participants, all interested to learn about how alternative capital market financing such as the Equity Crowdfunding and Peer-to-Peer financing platforms, can be accessed for their green financing needs.
4. Today's webinar will be focusing on companies that would have larger scale financing needs for their green and sustainable projects. Participants will be able know more about green and sustainable SRI sukuk and bond issuance, including the processes involved and incentives available. I would like to thank the speakers that we have here with us today, who will be sharing their knowledge and experience in this area.
5. I would also like to take this opportunity to express my appreciation to both Bank Pembangunan and Danajamin for their support for today's event. Multi-stakeholder collaborations such as this, are indeed crucial in accelerating the development of a facilitative and vibrant SRI ecosystem, and towards contributing to the overall national sustainability agenda.

Sustainable development and climate change agenda

Ladies and gentlemen,

6. Sustainable development is a subject that is gaining significant momentum and becoming mainstream globally, and as more nations transition towards a low carbon and green economy, individuals and corporations across the world are increasingly embracing more environmentally friendly and sustainable practices.
7. Commitments are being made by nations to address sustainability issues, and Malaysia is not excluded, as witnessed by the country becoming a signatory to the Paris Agreement on Climate Change and a party to the UN's Sustainable Development Goals (SDGs). To further reinforce its commitment in addressing climate change, Malaysia recently signed on as a member of the Coalition of Finance Ministers for Climate Action. More recently, the Malaysian Climate Change Action Council (MyCAC) has also been established, chaired by the Prime Minister.
8. As more economic sectors and companies embrace the sustainability agenda, this will spur greater demand for SRI financing and investment solutions. It has been estimated that a total of RM33 billion of funding is required by the renewable energy sector to boost the country's renewable energy generation mix1. In addition, RM38 billion would be required over the next 30 years for sustainable forest management and an additional RM6.5 billion over the next 10 years for the energy efficiency sector2. A report on SDG investments by Standard Chartered also highlighted that Malaysia requires USD73.7 billion of investments by 2030 for significant improvements on transport infrastructure to take place, which addresses the SDG 9 on Industry, Innovation and Infrastructure.
9. To support this growing demand, the Malaysian capital market is playing an important role in providing efficient and reliable access to financing of sustainable projects, that can positively contribute to the environment and overall society.

Financing of green and sustainable projects through the issuance of SRI sukuk and ASEAN-labelled bonds

Ladies and gentlemen,

10. The SC is committed to mobilising investments into financing sustainable and inclusive development. The SC's SRI Roadmap, launched in 2019, aims to create a facilitative SRI ecosystem and chart the role of the capital market in driving Malaysia's sustainable development, while complementing the national priorities in achieving the global agendas on sustainability and climate change. The SRI Roadmap has identified 20 recommendations aimed at strengthening Malaysia's position as a regional SRI centre, which also includes facilitating the issuance of more SRI products by expanding the breadth and depth of such instruments as well as widening access to SRI solutions within the capital market.
11. A pioneering SRI initiative in the Malaysian capital market was the SRI Sukuk Framework in 2014, which led to the creation of an innovative Shariah-compliant SRI instrument to facilitate the financing of projects that would benefit the environment and society. As at March 2021, a total of RM 5.64 billion of SRI sukuk had been issued under the Framework since its introduction, including the issuance of the world's first green sukuk in 2017.
12. Of the total issuance amount, it is observed that 64% was raised for the financing of renewable energy projects in Malaysia. Looking ahead, with greater awareness in the market combined with growing realisation of the long-term value of green and sustainable projects that would support Malaysia's transition towards a low carbon economy, there are significant opportunities for the SRI sukuk and bond market to attract a more diversified issuer base, undertaking a wider range of SRI projects.
13. To achieve this outcome, continued efforts on awareness raising initiatives such as today's webinar, will enable potential issuers and financial intermediaries to enhance their familiarity on SRI financing avenues and eventually facilitate fundraising for their sustainability projects by attracting interested investors.
14. In this regard, Capital Markets Malaysia – the organizer of today's webinar – has established three Centres of Excellence over the last 12 months or so, with relevant stakeholders, to raise awareness and facilitate capacity building among corporates, financial intermediaries and institutional investors respectively. These centres complement other initiatives undertaken towards strengthening the SRI ecosystem in Malaysia.
15. On the regional front, the SC, through ASEAN groupings including the ASEAN Capital Markets Forum (or ACMF), also plays a key role in the development of sustainable finance and in broadening the sustainable asset class in ASEAN. One of the ACMF's earliest initiatives was the introduction of the suite of ASEAN Green, Social and Sustainability Bond Standards in 2017 and 2018, which are aligned to globally accepted principles and guidelines.
16. Currently, the total issuances of labelled ASEAN Green, Social and Sustainability bonds and sukuk amount to USD 11.94 billion, with Malaysia accounting for 25% of the total3. This includes Malaysia's first sovereign sustainability sukuk issued recently, which is aligned to the ASEAN Sustainability Bond Standards. This provides clear signaling of the Malaysian Government's commitment towards the sustainability agenda while at the same time encourages greater mobilization of private sector financing towards sustainable infrastructure projects that are aligned to the SDGs.
17. Globally, we are already witnessing strong focus on corporate sustainability as a response to stakeholders who are increasingly demanding for better sustainability practices. To support this shift, there are more issuances of green, social and sustainability-labelled sukuk and bonds in the market today, as well as a rising trend on transition finance instruments by multinational companies across various industries. These include airlines such as Etihad Airways' sustainability linked sukuk, which is also the world's first transition sukuk; energy company Enel's three green bond issuances and a sustainability-linked bond; and Novartis' sustainability-linked bond in the pharmaceutical industry. These are just a few examples of the growing momentum for such issuances across the world, so Malaysian corporates will have to be "in the game" if we are to attract investors that are becoming more discerning in their views on sustainable and responsible investing.

Closing

Ladies and gentlemen,

18. As we transition towards a low carbon and green economy, private sector participation in pursuing this agenda is critical. As the regulator, the SC's initiatives in developing a facilitative SRI ecosystem in the Malaysian capital market, also aims to provide market-based financing opportunities that are accessible to all. The SC and its affiliates will also continue to advance the SRI agenda by building on the foundations laid over the last few years. Collaborations with the relevant stakeholders will continue to be conducted to enhance the awareness on green and sustainable financing amongst market participants.
19. In closing, I would like to express my deepest appreciation to everyone present here today as we seek to continue making collective progress in this very important area. I hope you do take the opportunity to engage the speakers during the Q&A sessions later and find the webinar informative and useful. Thank you.

1

Estimates by Sustainable Energy Development Authority (SEDA)

2

Estimates by the World Wildlife Fund (WWF)

3

Statistics as at 6 May 2021
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