10 Oct

Four Key Trade Bodies Agree To Grow Green Sukuk Sector

Dubai Islamic Economy Development Centre has announced an agreement with the Dubai International Financial Centre, the Dubai Financial Market, and the Climate Bonds Initiative to collaborate on growing the green Sukuk sector.

Dubai Islamic Economy Development Centre (DIEDC) has signed a memorandum of understanding (MoU) in this regard. They signed the agreement with the Dubai International Financial Centre (DIFC), the Dubai Financial Market (DFM), and Climate Bonds Initiative (CBI), a statement said.

It aims to promote the issuance of green Sukuk in the UAE and across the world, in addition to developing certification standards for green Sukuk along the lines of the Climate Bonds Standard and Certification Scheme, the statement added.

According to Moody’s, green bond issuance rose by 40% to $47.2bn globally in the first quarter of 2019, backed by strong corporate issuers.

Environmental credentials

CBI developed Climate Bonds Standard, a set of eligibility criteria to determine whether a relevant bond can be categorized as ‘green’, thereby enabling investors to make informed decisions about the bond’s environmental credentials.

Earlier this year, DFM and DIFC launched the Dubai Sustainable Finance Working Group. It is mandated to work to achieve the UAE’s nationally determined contributions to the UN’s Sustainable Development Goals and the strategic objectives of Dubai Plan 2021.

Abdulla Mohammed Al Awar, chief executive of DIEDC, said: “Through the MoU, DIEDC and its partners aspire to maximize the potential of the Islamic economy sectors, particularly Islamic finance, and contribute to increasing the number of businesses from the Far East that tap into these sectors.

“This agreement builds on the center’s vision and lays down the foundation for promoting green Sukuk locally and internationally. The demand for green Sukuk is steadily growing and requires an appropriate certification scheme that allows the segment to flourish.

“We are confident in our choice of partners for this important project. Our collective expertise will accelerate the growth of this market, and we invite all relevant stakeholders to come forward and contribute to this worthwhile endeavor.”

Arif Amiri, chief executive of DIFC Authority, said: “Sustainable finance is fundamental to drive the future of finance in the region and across the globe. DIFC shares a common goal with DFM and DIEDC to build a strong and sustainable financial services sector in the UAE and across the wider region.”

Sean Kidney, chief executive of Climate Bonds Initiative, added: “Scaling up green Sukuk is vital to meeting the climate finance challenge we all face. This agreement provides a new platform for cooperation around growing regional and global green Sukuk, compatible with international standards. It signals a new phase of stakeholder cooperation to build investor confidence and market opportunities for green investment.”

Originally published on www.international-advisor.com

Please note that Green Sukuk is a fairly new concept. According to Climate Bonds Initiative, a body to mobilize capital market for climate change solutions, Green Sukuk are Shari'ah compliant investments in renewable energy and other environmental assets. They address Shari'ah concern for protecting the environment. Proceeds are used to finance construction, to refinance construction debt, or to finance the payment of a government-granted green subsidy.

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