Environmental, Social & Governance (ESG)
The wake of the 2008 global financial crisis brought with it changes, among them increased disclosure requirements aimed at improving transparency whilst banking and financial systems were rebuilt. These changes included an increased focus on environmental, social and governance (ESG) risks in relation to the demand for investments yielding both adequate financial returns as well as a long-term positive impact on the community and environment.
Subsequently, the Securities Commission Malaysia (SC) introduced in 2014 its Sustainable and Responsible Investment (SRI) Sukuk Framework (“SRI Framework”) to facilitate and encourage sustainable and responsible investing, which also required compliance with ESG standards.
Our Overarching Approach
Our firm has always been quick to identify and understand risks involved in the projects, energy and infrastructure sector and project financing. We take an overarching approach in our advice to clients in identifying ESG matters and other risks, and how to manage such risks in compliance with applicable standards and regulations, inclusive of the SRI Framework, the ASEAN Green Bond Standards issued by the ASEAN Capital Markets Forum, which are based on the International Capital Markets Association’s (ICMA) Green Bond Principles.
Our Market Recognition:
- Islamic Finance News (IFN) Law Awards 2018: ESG, Green, SRI Law Firm of the Year;
- IFN Law Awards 2019: ESG, Green, SRI Law Firm of the Year; Energy & Natural Resources Law Firm of the Year;
- Islamic Finance Deal of the Year Awards 2021: Awarded the Project & Infrastructure Finance Deal of the Year for advising on the RM5.75 billion financing to Infracap Resources (see below);
- Islamic Finance Deal of the Year Awards 2021: Awarded the Sustainable Responsible Investment/Environmental Social Governance Deal of the Year at the Islamic Finance Deal of the Year Awards 2021 for advising on the RM500 million Sustainable Sukuk financing to SME Bank (see below).
Our Deal Experience:
Our firm’s experience includes advising on sustainable and green finance projects in the renewable energy sector, investments, joint ventures, mergers and acquisitions and carbon trading projects inclusive of the following:
- Quantum Solar Park’s 2017 issuance Of Green SRI Sukuk of up to RM1 Billion to fund the construction of 3 large solar power plants with a total capacity of 150 MW, the (then) largest green Sukuk in the world of RM1 billion (US$241.53 million), the generation capacity of which would assist Malaysia towards achieving its renewable energy generation target by 2020;
- Tadau Energy’s issuance of RM250 million Sukuk Wakalah in 2017, the world’s first green Sukuk which greatly facilitated Malaysia’s position as a key driver in the green Islamic financial market and paved the way for more sustainable and responsible financing in Malaysia, in compliance with the SRI Framework and the ASEAN Green Bond Standards;
- PR1MA Corporation Malaysia’a RM5 billion combined Islamic medium term notes programme and syndicated revolving credit-i facility established in 2017 and guaranteed by the Government of Malaysia – this is a social impact deal, whereby PR1MA is mandated to build 500,000 homes for moderate income Malaysians, one of the first transactions focusing on housing needs for underserved Malaysians;
- Pasukhas Green Assets’ RM200 million issuance of Sukuk Wakalah/Murabahah in 2019, the first issuance of ASEAN Green SRI Sukuk pursuant to the ASEAN Green SRI Sukuk program, the objectives of which are consistent with the eligibility requirements of the SRI Framework, as well as the ASEAN Green Bond Standards – this deal demonstrates the issuer’s commitment to contributing to the nation to reduce its dependence on power generated using fossil fuels;
- the RM5.75 billion financing to Infracap Resources (a Sarawak State funding vehicle) for 11 specific development state projects throughout Sarawak, on the credit strength of the Sarawak State Government, which projects include the Northern Coastal Highway (Limbang/Lawas road) and Kuching Urban Transportation System – the issuance is compliant with ESG principles as prescribed under the United Nations Global Compact;
- the RM500 million Sustainable Sukuk financing to SME Bank to fund its ESG initiatives such as entrepreneurial training and job creation, which was the first ESG issuance from a Malaysian Development Finance Institution;
- CIMB Investment Bank’s issuance of senior/subordinated Islamic medium term notes of up to an aggregate amount of RM1.5 billion whereby the notes were to be issued in compliance with (a) the SRI Framework; (b) the ASEAN Green Bond Standards; (c) the ICMA’s Green Bond Principles; and (d) such other guidelines or frameworks or standards in relation to green bonds issued from time to time;
- advised various Malaysian entities in their bids to develop and construct waste to energy facilities;
- advised on the acquisition of an entity involved in carbon credits offset and trading with solar and wind assets; and
- advised on emission reduction purchase agreements in relation to renewable energy projects.