Ecologies of green finance: Green sukuk and development of green Islamic finance in Malaysia

Abstract

In this paper, we analyse the recent development of green sukuk (often referred to as an Islamic green bond) since its issuance in Malaysia in 2017, and critically evaluate whether it addresses some of the existing contradictions of green finance. Using a financial ecologies approach, we examine Malaysia's configuration of green sukuk as drawing from the existing international green bond regime, partnership with the World Bank, and Malaysia's own experience and expertise in Islamic finance, with the objective of building Kuala Lumpur's competitiveness as a global Islamic financial centre. Through documents analysis and interviews with key market actors in Kuala Lumpur and other financial centres, our findings point to the emergent international adoption of green sukuk. While this achieves Malaysia's state-building objectives, specifically through expanding Malaysia's sukuk market and advancing its status as a frontier of Islamic financial innovations, the potential for improving the current green bond regime has been more doubtful. A key limitation is the incorporation of existing Green Bond Principles, which enables not only green sukuk's international acceptance but also renders it susceptible to greenwashing. By examining the intersection of different ecologies of green and Islamic finance, we reveal the contradictions and limitations of green sukuk in contributing to Malaysian state-building and climate action.

Buy what you want, today! Platform ecologies of ‘buy now, pay later’ services in Singapore

“…Picking up from a recent strand of economic geographic literature that has productively deployed the financial ecologies concept in examining new financial logics and their networked behaviours under platform finance, such as the variegated types under the crowdfunding economy (Langley & Leyshon, 2017a), emerging financial innovations such as Islamic green bonds (Liu & Lai, 2021), and the variegated nature of consumer indebtedness under digital modes of debt collection (Burton, 2020), this paper proposes that 'platform ecologies' may provide greater analytical purchase in capturing the dynamic developments that are rapidly unfolding under platform finance as driven by fintech. Platforms are particular comings together of code and commerce: the intermediation of digital economic circulation is achieved by deploying the infrastructures of participation and connectivity where aggregated data are acted on (Langley & Leyshon, 2017b, p. 17).…”

Corporate green Sukuk issuance for sustainable financing in Indonesia

“…Green Sukuk can also be used as investment financing for producing renewable energy sources (Dinçer et al, 2019). Liu and Lai (2021) showed that green Sukuk did play a role in supporting sustainable development. Several other studies discuss corporate green investment and sustainable financing and show that green investments can provide additional benefits for companies (Pratanjana & Simbolon, 2020;Taghizadeh-Hesary et al, 2021).…”

“…The low willingness of companies to issue green Sukuk is caused by several inhibiting factors: a higher risk profile, poor green taxonomy, time-consuming and higher costs, less attractive benefits, and prob-lems in identifying green assets (Keshminder et al, 2022). Furthermore, other challenges corporations face include a legal and regulatory framework that has not been expressly regulated (Liu & Lai, 2021). Moreover, there is a limited understanding of market players on environmental-based sharia capital market products and a lack of socialization of sharia investment product innovations, especially environmental-based sharia bonds and sustainable development (Karina, 2019).…”

The Role of Green Sukuk in Realizing the Sustainable Development Goals 2030 Agenda

“…According to research by Ibrahim & Shirai (2020), green sukuk use compassionate contracts, equity-like investments, and risksharing finance strategies to assist circular firms driven by the comprehensive goal of maqasid sharia. Green sukuk also provides more diverse range of financing options for projects relevant to achieving the SDG (Hariyani & Kusuma, 2020;Liu & Lai, 2021;Morea & Poggi, 2017;Nehal, 2021), reduce waste through the implementation of environmental restoration projects (Campisi et al, 2018;Hariyani & Kusuma, 2020;Keshminder et al, 2022), enable members of the community to find employment through various empowerment programs (Hariyani & Kusuma, 2020), provide funding for green projects (Alam et al, 2016;Azhgaliyeva et al, 2020;Hariyani & Kusuma, 2020;Munir et al, 2020;Richardson, 2020), economic developent for community and society (Abdullah & Nayan, 2020;Hariyani & Kusuma, 2020;Ibrahim & Shirazi, 2020), paves the way for the country to become a more developed nation and provides possibilities for future generations to preserve nature (Munir et al, 2020;Santoso, 2020), enhance the credibility of companies through the promotion of Corporate Social Responsibility (CSR) programs (Alam et al, 2016), represent a capital market product that may be bought, sold, and traded, offering the possibility of liquidity and portability (Alam et al, 2016), and refinancing previous loans from eligible green projects (Azhgaliyeva et al, 2020).…”