On 30 June 2022, the Securities Commission Malaysia (SC) launched the sustainable and responsible investment-linked (SRI-linked) sukuk framework to facilitate fundraising by companies that address sustainability concerns, such as climate change, or a social agenda, with features that relate to the issuer's sustainability performance commitments.

The framework is an extension of the initiatives under the SRI roadmap that was introduced in 2019 to broaden SRI products offerings. More significantly, this initiative reflects the SC's commitment to expand the reach of the Islamic Capital Market (ICM) to the broader stakeholders of the economy and build an enabling ICM ecosystem for the sustainability agenda.

Under the framework, the proceeds raised can be utilised for general purposes, subject to the issuer committing to future improvements for sustainability outcomes within a predefined timeline, which will be monitored using key performance indicators (KPIs). The financial characteristic or structure of the SRI-linked sukuk may be varied based on the success or performance of the issuer in meeting its KPIs and sustainability goals.

The framework also provides greater transparency for investors by requiring issuers to appoint an external reviewer before issuance and an independent verifier post-issuance to assess compliance with the framework and issuer's sustainability performance, which can be tracked by investors.

Pursuant to this, revisions have been made to the following guidelines, introducing a new chapter on the framework and setting out the additional requirements in relation to the issuance of SRI-linked sukuk:

  • Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework.
  • Guidelines on Issuance of Corporate Bonds and Sukuk to Retail Investors.

The revisions and amendments made to these guidelines also include editorial amendments to enhance clarity and renumbering of pages consequent to the introduction of the new chapter on SRI-linked sukuk.

The Prospectus Guidelines has also been revised to reflect the introduction of the framework as set out in the Guidelines on Issuance of Corporate Bonds and Sukuk to Retail Investors, particularly the requirement under the framework for the publication of an expert's reports.

For further information on this topic please contact Pamela Kung at Shearn Delamore & Co by telephone (+60 3 2027 2911) or email ([email protected]). The Shearn Delamore & Co website can be accessed at www.shearndelamore.com.