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The green bond industry has achieved phenomenal growth since its beginning in 2007. Today, leading corporations in various sectors tap into green bonds to raise funding. Toyota revolutionised the green bond market by introducing the auto industry’s first-ever AssetBacked Green Bond in 2014. In May 2016, the London Taxi Co issued a US$400 million (RM1.56 billion) green bond to finance projects, enabling the production of zero-emission-capable vehicles. The first green sukuk was issued in July 2017 by Tadau Energy, with an issuance of RM250 million Green SRI Sukuk to finance a large-scale solar project. Subsequently in October 2017, Quantum Solar Park Malaysia issued its green SRI sukuk worth RM1 billion to finance the construction of three large-scale solar photovoltaic plants. The green sukuk market is expected to grow further in 2018 and beyond. However, the sukuk industry will have to face a twofold challenge. Firstly to convince the issuers to adopt the Shariah-compliant route, secondly to achieve critical mass for the green sukuk market in order to achieve optimal costs of issuance and enable a liquid secondary market trading.

Sukuk investing in environmentally sustainable projects has become increasingly popular in the recent past. In the latest development, Malaysia saw its first green sukuk in July, when solar power firm Tadau Energy came out with a green sukuk with a tenure of 16 years, raising 250mn ringgit ($59.2mn). Malaysia’s Securities Commission came up with a Sustainable Responsible Investment Sukuk Framework as early as in 2014. This regulation clarified that proceeds of such sukuk should be used to preserve the environment, conserve the use of energy and promote renewable technologies. The World Bank lauded Malaysia for its innovative approach. Another initiative emerged in the Gulf Cooperation Council. The Green Sukuk and Working Party was set up as a collaboration of experts in project development, environmental standards, capital markets, and Islamic finance. Founders include Masdar City’s Clean Energy Business Council, the Climate Bonds Initiative and the Gulf Bond and Sukuk Association. The group is now developing green sukuk for interested issuers, including governments, companies and development banks.

The #Malaysian company Tadau Energy became the first entity in the world to issue a green sukuk. Called Green SRI Sukuk Tadau, the RM250 million Sustainable Responsible Investment (SRI) syariah-compliant bond holds a tenure of up to 16 years. RAM Rating Services assigned it a long-term rating of "AA3". The framework underlying the green sukuk’s debut is the result of a collaboration between Bank Negara Malaysia, the Securities Commission (SC) and the World Bank. World Bank country manager Faris Hadad-Zervos called the issuance of the green sukuk a historic event, not just for Malaysia but for the whole world. Faris stressed the creation of the framework was key in making the world’s first SRI sukuk a reality. World Bank financial specialist Jose De Luna Martinez said the Tadau sukuk would potentially lead Malaysia to be a green sukuk hub of the Asean region.