Islamic Finance 

Malaysia: KWAP calls for more green sukuk issuances

| 12 February, 2018
Malaysia: KWAP calls for more green sukuk issuances
Kumpulan Wang Persaraan (Diperbadankan) chief executive officer Datuk Wan Kamaruzaman Wan Ahmad said the need to go green is higher than ever now, and the market needs to move faster to meet that demand. [NSTP/SADDAM YUSOFF]


Retirement Fund Inc (KWAP) Kumpulan Wang Persaraan (Diperbadankan) (KWAP) hopes that there are more green sukuk in the pipeline as the demand has now outstripped supply.

Speaking to NST Business in an interview, KWAP chief executive officer Datuk Wan Kamaruzaman Wan Ahmad said the need to go green is higher than ever now, and the market needs to move faster to meet that demand.

KWAP had just last week at the 2018 World Capital Markets Symposium become the first pension fund in Malaysia to be a signatory of the United Nations (UN)-supported Principles for Responsible Investment (PRI).

As a signatory, the fund will support and promote the use of environmental, social and governance (ESG) investing programmes.

“KWAP holds the principle that integrating ESG practices can generate sustainable risk-adjusted returns and enable KWAP to perform its operations in a responsible manner.

“In the past, we have bid for our part of the green Sukuk but we did not get the full allocation as the issuance size is small and it could not accommodate all the interested parties,” he said.

Wan Kamaruzaman said Malaysia should be able to further propel the green sukuk market, given its position as the global hub of Islamic finance and the backing of the Securities Commission (SC) which had launched the Sustainable Investment Sukuk framework back in 2014.

In July 2011, Malaysia, through Tadau Energy, issued the world’s first green sukuk; a RM250 million Sustainable Responsible Investment (SRI) sukuk to finance the construction of an LSS (large scale solar) project in Kudat, Sabah.

Quantum Solar, meanwhile, announced the world’s largest green SRI sukuk issuance of RM1 billion, with intention to raise capital to fund a portfolio of three large-scale solar photovoltaic (PV) plants in Gurun, Kedah, Jasin in Melaka, and Merchang, Terengganu.

Permodalan Nasional Bhd had in November 2017 announced plans to raise a 15-year tenure secured green sukuk, the Merdeka Asean Green SRI Sukuk programme via an unrated sukuk programme of up to RM2 billion.

As of now, some 50 to 60 per cent of its RM125 billion of KWAP’s total assets under management (AUM) of RM125 billion is ESG compatible.

Wan Kamaruzaman is confident that this figure would jump to 70 per cent on the back of its partnership with PRI.

“We do believe that we will hit that 70 per cent levels eventually, but by being a signatory to the PRI, it will make that objective achievable faster,” he said.

Also present at the interview was PRI managing director, Fiona Reynolds who is confident that KWAP’s presence as a signatory will help push other local entities to also be ESG compatible.

“Malaysia as a country is increasingly moving towards green and sustainable capitalism. Over recent years, both the SC and the local bourse Bursa Malaysia have sent very strong signals towards this end,” she said.

“Now that KWAP has become one of our signatories, we do believe that other local corporate will follow suit given the fund’s standing in the local corporate landscape,” Reynolds added.

The PRI is the world's leading proponent of responsible investment as it works to understand the investment implications of ESG factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions.

The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole.

Copyright New Straits Times