The Malaysian bond and sukuk market are strategically positioned to offer essential financing for productive and socially responsible projects. Malaysia has pioneered the issuance of Green SRI Sukuk since the introduction of the Sustainable & Responsible Investment (SRI) Sukuk framework in 2014. In 2017, Malaysia issued the world’s first green SRI sukuk – to finance the construction of large-scale solar photovoltaic power plants in Kudat, Sabah. Since then, Green SRI Sukuk as a funding instrument has gained widespread appeal in Malaysia.
According to Dato’ Seri Dr. Awang Adek Hussin, the Chairman of Securities Commission Malaysia, with 35% of the global outstanding sukuk, Malaysia leads as the largest sukuk market, surpassing Saudi Arabia and Indonesia. Malaysia continues its regional leadership in SRI sukuk, with three SRI Sukuk totalling RM2.2 billion lodged with the SC by end-October 2023. The country also contributes significantly, accounting for 27% of the total issuance of ASEAN Green, Social, and Sustainability bonds and sukuk amounting to US$41 billion.
In fact, according to International Energy Agency (IEA), to reach net zero emissions by 2050, annual clean energy investment worldwide will need around USD4 trillion by 2030, which translates to pockets of opportunities for investment across various sectors and industries. Malaysia, alone, requires energy transition financing needs at between RM 1.2 trillion and RM 1.3 trillion by 2050 according to National Energy Transition Roadmap (NETR). Given the substantial financing needs, the financial sector, especially the capital market, must persist in facilitating funding and investments in these crucial areas to align with the Government’s priorities.
In the recent Budget 2024 announcement, the Government remains committed to ongoing support for SRI. The Government plans to extend the tax exemption to fund management companies that manage SRI funds as well as tax deductions on the cost of issuing SRI sukuk until the assessment year 2027. Income tax exemption expanded to include SRI-Linked Sukuk Grants and bonds issued under the ASEAN Sustainability-Linked Bond Standards (ASEAN SLBS) approved by SC between 1 Jan 2024 until 31 Dec 2025. Separately, the Federal Government will pioneer the issuance of biodiversity sukuk up to RM1 billion involving the replanting of degraded forests that will in turn generate carbon credit. This replanting initiative will be undertaken in collaboration with interested state governments and will potentially benefit from some of the carbon credit generated.
Phillip Capital Management Sdn Bhd (PCM)’s role in ESG
In line with the nation’s goal towards sustainability, PCM has integrated ESG factors that we attest as material and relevant for a company’s financial performance and long-term sustainability into our investment decision-making process. These include but not limited to ESG ratings by established index, environmental considerations (climate change, natural resources preservation, pollution & waste), social considerations (health & safety, community engagement, employee relations) and governance considerations (board independence, transparency & disclosure, shareholder rights).
Separately, PCM offers discretionary portfolio that invests in stocks with high ESG ratings from the F4GBM and F4GBMS Indices, namely PMART and PMA ESG. There are both conventional and Shariah options available. PMART and PMA ESG is suitable for investors who want to optimise the risk-adjusted return by constructing a diverse sustainable portfolio of ESG companies.
To explore the companies in which both Conventional and Shariah ESG mandates invest, you can refer to the provided link. We like these companies because they have received high ESG ratings, which we believe can contribute to their long-term sustainability, responsibility, and profitability.
Please click on the link to learn more or email us at cse.my@phillipcapital.com.my if you require any further information.
Disclaimer:
The information contained herein does not constitute an offer, invitation or solicitation to invest in Phillip Capital Management Sdn Bhd (“PCM”). This article has been reviewed and endorsed by the Executive Director (ED) of PCM. This article has not been reviewed by The Securities Commission Malaysia (SC). No part of this document may be circulated or reproduced without prior permission of PCM. This is not a collective investment scheme / unit trust fund. Any investment product or service offered by PCM is not obligations of, deposits in or guaranteed by PCM. Past performance is not necessarily indicative of future returns. Investments are subject to investment risks, including the possible loss of the principal amount invested. Investors should note that the value of the investment may rise as well as decline. If investors are in any doubt about any feature or nature of the investment, they should consult PCM to obtain further information including on the fees and charges involved before investing or seek other professional advice for their specific investment needs or financial situations. Whilst we have taken all reasonable care to ensure that the information contained in this publication is accurate, it does not guarantee the accuracy or completeness of this publication. Any information, opinion and views contained herein are subject to change without notice. We have not given any consideration to and have not made any investigation on your investment objectives, financial situation or your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any persons acting on such information and advice.
