IsDB Announces Plans to Launch First Green Bond at Sukuk Summit in Luxembourg

The Islamic Development Bank (IsDB) has announced that it has created an innovative sustainable finance framework to help issue its first green bond; the announcement was made as part of the IsDB second European Sukuk Summit held in Luxembourg on Monday.

The IsDB has successfully finalised a sustainable finance framework to help issue the bank's first green Sukuk bond. Through the new framework, the green Sukuk will be the first of its kind in Europe following the very first globally seen green Sukuk launched in Malaysia in 2017. IsDB has now become the first AAA-rated institution to issue a green Sukuk. The Sukuk will be issued to reflect the IsDB's ambitions to help leverage greater funds from capital markets into specifically green development projects by unlocking the necessary funds through Islamic financing.  

Since Sukuk was proven to easily fit into the current fixed income and bond system infrastructure and is already acceptable to many conventional fixed-income security investors, the involvement of an established financial hub like Luxembourg to set up the framework aims to contribute positively towards further development of Islamic finance from the Sukuk and Capital market segment.

In a statement, Dr. Bandar Hajjar, President of the IsDB, said: "It gives me great pleasure to announce that IsDB has finalised and published a Sustainable Finance Framework, under which we will be issuing our first-ever Green Sukuk this month. As we march ahead in our pursuit of the SDGs, the Framework allows us to leverage on innovative Islamic financing instruments such as the Green Sukuk in order to mobilise resources for Green projects in our Member Countries".

To mark the occasion, the IsDB held their annual "Sukuk Summit 2019: Investing for Development" in Luxembourg where key partners, including the Ministry of Finance as co-host, gathered to welcome the announcement and explore the new opportunities within the framework, as well as how these opportunities might be mobilised to help strengthen Luxembourg's position as a leading hub for Islamic financing.

As part of the Summit, and reflecting on themes of the day, Bandar Hajjar, President of the IsDB, and Werner Hoyer, President of the European Investment, in the presence of Luxembourg's Minister of Finance, Pierre Gramegna, signed a Memorandum of Understanding (MOU) to set out the framework of cooperation for co-financing. Each institution intends to dedicate funds worth USD $1 billion over the next five years for co-investment in countries of joint operations. With priority given to countries in Africa and the Middle East, the financing will target jobs creation and growth, vital infrastructure, support for climate action and technology and innovation.

Luxembourg's Minister of Finance, Pierre Gramegna, commented: "As a leading European hub for Islamic Finance and ranking 4th globally as a green financial centre, Luxembourg is without any doubt the ideal location to hold this year's edition of the Sukuk Summit, as it will help to more closely connect Islamic finance with green and sustainable finance". He added: "I welcome this Summit as an important step in forging a closer relationship and explore ways to scale up cooperation between Luxembourg and the Islamic Development Bank, as we share the same goals: to act as catalysts in global efforts to move the necessary investments in sustainable development and climate projects from billions to trillions".

Funds raised via Sukuk issuance are utilised by IsDB for its general corporate purposes, which include financing for medium and long-term projects in its member countries. Financing is provided in various sectors such as agriculture, infrastructure, energy, health and others. In recent years, IsDB has mainstreamed its focus on the SDGs in its operations.

In anticipation of the new issuance, Dr. Bandar Hajjar noted that he was "very pleased to share that the Framework has been awarded a "Medium-Green Shading" as a Green Bond issuer and IsDB has been assigned an ESG Rating of a low-risk score of 11.5 out of 100. These achievements are testament of our commitment to the SDGs and are crucial in helping us achieve our strategic objective of inclusive sustainable development for all".

Inspired by the announcement, panels on the day discussed topics within the wider theme of Sukuk and Islamic financing including: Green Sukuk: Implementing a sustainable financial apparatus to achieve the SDGs; FinTech in Sukuk and Islamic Capital Markets; and Engaging the public sector: Building partnerships with the public sector to integrate Sukuk opportunities.