Green sukuk – Malaysia surviving the bumpy road: performance, challenges and reconciled issuance framework

• Published in: Qualitative research in financial markets 2022-01, Vol.14 (1), p.76-94
• Main Authors: Keshminder, J.S, Abdullah, Mohammad Syafiq, Mardi, Marina
• Format: Article
• Language: English
• Subjects: Alliances; Capital costs; Capital markets; Climate change; COVID-19; Debt financing; Development banks; Environmental stewardship; Innovations; Institutional investments; International finance; Investors; Islamic financing; Sustainable development
• ISSN: 1755-4179; 1755-4187
• DOI: 10.1108/QRFM-04-2021-0049

Purpose Green sukuk is a tool to finance climate change which has garnered considerable attention. However, having only recently come into existence has its own set of challenges for this tool that require immediate identification and government intervention to intensify its growth. This study aims to explore the challenges encountered by green sukuk issuers and the structure of a reconciled green sukuk issuance framework to speed up the market’s growth with the right interventions. Design/methodology/approach The study engaged a qualitative approach via multiple case study interviews with green sukuk issuers and used expert views for data triangulation to generate the findings. A total of four green sukuk issuers participated in the interviews, and for data triangulation purposes, four expert’s opinions and views were considered. The thematic analysis technique is used to report the findings. Findings It was revealed that amongst the challenges encountered in the green sukuk market are shoddy green taxonomy, difficulty in identifying green assets, it is time-consuming and costly, no compelling benefits and exposure to higher-risk profiles. Research limitations/implications This study may be influenced by observer error and observer bias. However, the researchers have taken cautious steps to overcome these issues by following strict case study methodology procedures and triangulating the qualitative research findings with views from green sukuk experts. These interventions increased the rigour and trustworthiness of the results. Originality/value This study is amongst the pioneer in Malaysia, exploring challenges in the green sukuk market. The results are relevant to governments, regulators, institutions and central banks to structure the right interventions to counter the challenges. Greater government involvement is required to strengthen the green sukuk market and to spearhead the green agenda.