1 Reply Latest reply: Aug 25, 2017 3:58 PM by kmzz RSS

    Green Bonds + Islamic Finance

    808229 C4D Connoisseur


      On July 27 Malaysia pioneered World's First Green Islamic Bond - sukuk




      The Islamic part of the bond means it is governed by Sharia law and there cannot be any interest - or coupon payment on the bond.

      While a bond is an obligation of the issuer to pay to bondholders interest and principal, a Sukuk is a certificate giving Sukuk holders an undivided beneficial ownership in the underlying assets. Consequently, Sukuk holders are entitled to share in the revenues generated by the Sukuk assets as well as being entitled to share in the proceeds of the realization of the Sukuk assets. (Sukuk - Wikipedia)


      The green part of the bond means its proceeds must be used only for climate-friendly investments, and the issuer must report on the impact of the use of proceeds.(What Are Green Bonds?)




      The questions are - How do you define those climate/green investments? And does it influence the price of the instrument? The short answer to the first question is - it depends, and to the second one - no. At least this is what the latest Analysis from Climate Bonds shows https://www.climatebonds.net/2017/08/green-bond-pricing-primary-market-there-greenium-latest-analysis-climate-bonds





        • Re: Green Bonds + Islamic Finance
          kmzz C4D Expert

          Great topic! I hope it raises the interest of other CoP Green Finance members, particularly those with expertise in climate finance (for example Leela Raina, Paul Dolan, Raul Ivan Alfaro Pelico, and others). What are your thoughts on the topic of green corporate bonds, the standards used, and the impact achievable?


          While the interest of investors to buy green has apparently increased, companies have shown highly diverse interest in using a "sustainable" or "green" standard when issuing a bond. TESLA is a great example of being a pure play green company which issued a conventional bond, while there are other examples, e.g. REPSOL, which issued a "green" bond meeting the Green Bond Principles but still provoking disagreement in the market (see this article which appeared in Climate Bond Initiative in May 2017).