Green Sukuk: Malaysia Taking The Lead

J.S. Keshminder, Gurmit Kaur Bariam Singh, Zainora AB. Wahid, Mohammad Syafiq Abdullah
Faculty of Business and Management, Universiti Teknologi MARA


Green Sukuk serves as an alternative form of finance which is equipped with both climate mitigation and Shariah compliance features compared to conventional finance. Acknowledging the superiority of green Sukuk to raise funds to mitigate climate change, the World Bank took the lead to promote it globally by making Malaysia the premier green Sukuk hub. This study seeks to assess the development of green Sukuk from the aspect of issuance and Shariah principle used in Malaysia since its inception in 2014. The study reveals that the development in the green Sukuk market is slow but is robust in moving from the energy industry to the building industry, while Shariah contracts used are based on the issuers’ underlying assets. The study concludes that the green Sukuk market is still small and liquidity constraint makes it difficult for investors to gain access. For the government to increase green Sukuk issuance, information about the performance, challenges, risks, and opportunities in the realm of green Sukuk must be made available to both issuers and investors.

Keywords: Green sukuk, Green energy, Socially responsible investment, Sukuk structure