Wednesday, Jun 23, 2021
MARC has assigned a “Gold” Sustainability Sukuk Assessment to the Sustainability Sukuk Framework (SSF) of Small Medium Enterprise Development Bank Malaysia Berhad (SME Bank). The SSF sets out the guidelines for SME Bank’s Sustainability Sukuk issuances under its proposed Islamic Medium-Term Notes (IMTNs) programme of up to RM3.0 billion and Islamic Commercial Papers (ICPs) programme of up to RM1.0 billion, with a combined limit in nominal value of up to RM3.0 billion.
The Gold assignation reflects the SSF’s alignment to the core components of the ASEAN Sustainability Bond Standards (ASEAN SUS), ASEAN Green Bond Standards (ASEAN GBS) and ASEAN Social Bond Standards (ASEAN SBS), and the Securities Commission Malaysia’s Sustainable and Responsible Investment (SRI) Sukuk Framework. The SSF sets out the use of the proceeds from the Sustainability Sukuk issuances, the process by which eligible projects are evaluated and selected, the allocation and management of proceeds, and impact reporting.
The proceeds from the Sustainability Sukuk issuances will be channelled to finance and/or refinance, in part or in whole, new or existing assets, businesses and/or projects that directly support 11 of the 17 United Nations Sustainable Development Goals (SDGs). The 11 categories align with the green and social project categories recognised by the ASEAN GBS and ASEAN SBS. The green project categories target six initial key sectors - energy, manufacturing, transport, building, waste and water – that have been identified by the National Green Technology Master Plan to facilitate green growth in Malaysia while the focus of the social project categories is on creating decent work, improving gender equality, and providing economic opportunities to unserved and underserved social groups. Given these approaches, MARC considers the expected sustainability benefits engendered by the proceeds from the issuances to be highly coherent with SME Bank’s sustainability plan, the SDGs, and the national sustainable development priorities.
The net proceeds from the issue of Sustainability Sukuk will be managed on a portfolio basis in accordance with the SSF evaluation and selection process of eligible projects which will involve SME Bank’s business division and various departments, led by its Sustainability Sukuk Working Committee. The allocation of proceeds and the eligible asset portfolio will be tracked internally, and such monitoring will be integrated into SME Bank’s annual reporting process. MARC notes that the process for the management of proceeds, as well as commitments on allocation and impact reporting are aligned with market practices.
The Gold assignation reflects the SSF’s alignment to the core components of the ASEAN Sustainability Bond Standards (ASEAN SUS), ASEAN Green Bond Standards (ASEAN GBS) and ASEAN Social Bond Standards (ASEAN SBS), and the Securities Commission Malaysia’s Sustainable and Responsible Investment (SRI) Sukuk Framework. The SSF sets out the use of the proceeds from the Sustainability Sukuk issuances, the process by which eligible projects are evaluated and selected, the allocation and management of proceeds, and impact reporting.
The proceeds from the Sustainability Sukuk issuances will be channelled to finance and/or refinance, in part or in whole, new or existing assets, businesses and/or projects that directly support 11 of the 17 United Nations Sustainable Development Goals (SDGs). The 11 categories align with the green and social project categories recognised by the ASEAN GBS and ASEAN SBS. The green project categories target six initial key sectors - energy, manufacturing, transport, building, waste and water – that have been identified by the National Green Technology Master Plan to facilitate green growth in Malaysia while the focus of the social project categories is on creating decent work, improving gender equality, and providing economic opportunities to unserved and underserved social groups. Given these approaches, MARC considers the expected sustainability benefits engendered by the proceeds from the issuances to be highly coherent with SME Bank’s sustainability plan, the SDGs, and the national sustainable development priorities.
The net proceeds from the issue of Sustainability Sukuk will be managed on a portfolio basis in accordance with the SSF evaluation and selection process of eligible projects which will involve SME Bank’s business division and various departments, led by its Sustainability Sukuk Working Committee. The allocation of proceeds and the eligible asset portfolio will be tracked internally, and such monitoring will be integrated into SME Bank’s annual reporting process. MARC notes that the process for the management of proceeds, as well as commitments on allocation and impact reporting are aligned with market practices.
The principal methodology used in this assessment is MARC’s Impact Bond Assessment (IBA) criteria published in December 2019, accessible from MARC’s official website at www.marc.com.my. The Impact Assessment is not a credit rating and is arrived independently of the credit rating process of the sukuk. SME Bank’s pre-issuance external review report can be accessed here.
Contacts:
Lim Wooi Loon, +603-2717 2943/ wooiloon@marc.com.my;
Yap Ngee Heong, +603-2717 2915/ ngeeheong@marc.com.my.