Khazanah Nasional Bhd is launching a RM1 billion sukuk ihsan programme, the country's first sustainable responsible investment (SRI) sukuk.
"Sponsored by Khazanah, the sukuk ihsan is the first SRI sukuk to be approved under the Securities Commissions' revised sukuk guidelines (issued in August 2014). To our knowledge, it is also the first social-impact bond (SIB) to be rated globally," said RAM Ratings in a statement yesterday.
The SRI sukuk will be issued by Ihsan Sukuk Bhd, a trust-owned company established for the sole purpose of raising capital to support the corporate and social responsibility efforts of Khazanah - the promoter of this exercise.
RAM Ratings has assigned an AAA(s)/stable preliminary rating to the RM1 billion sukuk ihsan programme.
As the issuer, Ihsan will raise funds under the Islamic principle of Wakalah Bi Al-Istithmar and/or other Islamic principles to be determined.
The initial issue of sukuk ihsan will be based on the Islamic principle of Wakalah, where proceeds will be used to purchase eligible sukuk investments while, Khazanah will, in turn, use the proceeds to fund syariah-compliant eligible SRI projects.
"Although the global SRI market is still nascent, we see tremendous growth potential given Malaysia's leadership in the global Islamic finance market as well as the increasing global and domestic demand for greater governance and ethical investment. In Malaysia, for instance, we see this in the various government initiatives to develop green energy," RAM Ratings CEO Foo Su Yin said.
In assessing the credit risks associated with sukuk ihsan, RAM had considered Khazanah's role as the sukuk holders' counter-party in the transaction structure.
Khazanah will invest the proceeds in either syariah-compliant tangible assets or syariah-compliant commodities purchased and sold under the principle of Murabahah (Commodity Murabahah Investment), with at least 33% of the sukuk proceeds invested in tangible assets.
"The AAA(s) rating is supported by Khazanah's role as the obligor under the purchase undertaking to buy the sukuk holders' interests in sukuk investments, as well as its commitment to make deferred payments pursuant to the Commodity Murabahah Investment in order to fully meet the obligations under the sukuk programme," he added.
Foo said that Khazanah's SRI sukuk will encourage greater private participation in sustainable and social-impact investments, and may even encourage new participants in the domestic sukuk market.
"Expanding and developing this segment is not without its challenges. As a start, however, we believe that Malaysia is on the right track towards creating a vibrant and possibly sizeable SRI sukuk market," Foo added.