Mudajaya Unit’s RM245 mil Green SRI Sukuk Wakalah Has Highest Environmental Benefit

Published on 05 Dec 2017.

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“Green bonds have enormous potential for greening Malaysia’s infrastructure and debt capital market as we transition towards a low-carbon economy,” says Chris Lee, Chief Executive Officer of RAM Consultancy. The global green bond market is experiencing tremendous growth supported by a rapidly growing investor interest for investments with positive impact. To support the development of the green bond market in Malaysia and the wider ASEAN, RAM Consultancy provides independent assessments (also known as second opinion review) on the issuer’s green bond framework against the transparency and disclosure requirements of relevant green bond standards and guidelines. 

The growth in green financing is well supported by the release of the Sustainable and Responsible Investment (SRI) Sukuk Framework by the Securities Commission Malaysia on 28 August 2014 and the ASEAN Green Bond Standards by the Securities Commission Malaysia’s led ASEAN Capital Markets Forum on 8 November 2017. Independent assessments of green bond framework have become a widely-adopted practice in the green bond sphere. 

RAM Consultancy has assigned the highest tier (Tier-1) for environmental benefit to Sinar Kamiri Sdn Bhd’s RM245 million Green SRI Sukuk based on the Shariah Principle of Wakalah Bi Al-Istithmar under the Securities Commission Malaysia’s Sustainable and Responsible Investment Sukuk Initiative (Green SRI Sukuk Wakalah). Sinar Kamiri, an indirect subsidiary of Mudajaya Group Berhad, is a special purpose vehicle set up to undertake the development of a 49MW solar photovoltaic facility in Sungai Siput, Perak. The proceeds from the sukuk will be solely used for the design, construction, ownership, operation and maintenance of the project. 

RAM’s Environmental Benefit assessment, which forms part of its second opinion review, essentially tiers projects based on their overall contributions towards the 2 Degrees Scenario (2DS). The top-tier projects comprise technologies that decarbonise the energy system. Located near the Equator, Malaysia has a vast potential to generate clean and renewable energy from the Sun. Electricity generation via solar power has a significantly lower carbon footprint when compared against fossil-fuel enabled power production. RAM opines Sinar Kamiri’s solar project will make an important contribution towards Malaysia’s renewable energy commitments and emission reduction targets. In addition, the project has the potential to stimulate socio-economic development of the surrounding community. 

RAM’s Environmental Benefit assessment is based on the International Energy Agency (IEA) estimate of the cumulative carbon reductions required by sector and technologies to achieve the 2DS. The 2DS was reaffirmed in the Paris Agreement during the 21st United Nation’s Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP21) where the goal is to limit global temperature rise to 2 degrees Celsius when compared against pre-industrial levels.

Sinar Kamiri’s Green SRI Sukuk Wakalah is aligned to the transparency and disclosure requirements of Securities Commission Malaysia’s SRI Sukuk Framework and the International Capital Market Association’s Green Bond Principles (GBP). Equally important, solar projects are recognised as green under the respective SRI Sukuk Framework and GBP.

Sinar Kamiri’s Green SRI Sukuk Wakalah is clearly defined and provides clarity on important aspects of project evaluation and selection, management of proceeds and reporting commitments. RAM Consultancy opines Sinar Kamiri has adequate processes to address key environmental and social issues pertaining to the development of the solar photovoltaic facility.  

A copy of Sinar Kamiri’s Second Opinion Report can be found via https://www.ram.com.my/   

 

Analytical contact
Dinagaran Chandra
(603) 7628 1039
dina@ram.com.my