Combating Climate Change in Malaysia: Green Sukuk and Its Potential

Combating Climate Change in Malaysia: Green Sukuk and Its Potential

Nor Razinah Mohd. Zain (International Islamic University Malaysia, Malaysia), Aznan Hasan (International Islamic University Malaysia, Malaysia), Siti Ainatul Mardhiah Yusof (International Islamic University Malaysia, Malaysia) and Engku Rabiah Adawiah Engku Ali (International Islamic University Malaysia, Malaysia)
DOI: 10.4018/978-1-7998-6811-8.ch017
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Abstract

One of the main purposes for the issuance of sukuk is to fund large-scale development projects. With the rising interest for responsible finance and investment, Muslim scholars propose that besides utilizing sukuk an instrument to finance purely developmental projects, sukuk could be used as a vehicle to raise funds for financing various projects that meet the criteria of social and responsible finance. Innovation in the sukuk issuance, for example green sukuk, has played a prominent role in financing infrastructure and renewable energy projects. With the introduction of Sustainable Development Goals (SDGs) by the United Nations in 2015 that strategize to be a blueprint to achieve a sustainable future for all, green sukuk is seen as one of the most potential instruments that can be used in achieving such SDGs. Green sukuk stands with an advantage of a Shariah-compliance financing instrument which, besides meeting the demands from the investors and stakeholders, is also able to provide for a better alternative in a term of social finance discourse. Looking closely into the initiative in combating climate change in Malaysia, this research qualitatively investigates the potential and roles of green sukuk in leading the trend in eco-friendly investments and development projects. The research found that there is a positive trend among investors towards issuing green sukuk that are based on eco-friendly investments and development projects.
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Introduction

Shariah has placed an important emphasis on the protection and preservation of the environment and surroundings. Still, they are easily neglected under the name of development and economic activities. The centre focus of such development and economic activities is to maximize profits and gaining more wealth. Different from the teaching of Shariah, the current economic activities which are largely driven by capitalism, have placed little consideration on the protection and preservation of the environment in the course of pursuing modern development. The past century has seen the awful practice of profit maximization which apparently started from the first industrial revolution era in the 1760s. The world turns to follow the flow of change where the economy is built up based on industry and machine manufacturing. At the same time, agricultural and cultivation are placed as a secondary sector. Such kind of economic activities lead to uncontrollable manipulation of natural resources, polluting rivers and seas, contaminating air, destroying lands and the natural habitat of flora and fauna, and their ultimate impacts can be traced to the existence of climate change as the world is facing now. Without proper consideration of the climate crisis, even the survival of humanity might be at risk.

Recently, a wake-up call is made by a 17-years old Swedish environmental activist Greta Thunberg where she stood in front of the world leaders during the United Nations Climate Change Summit of 2019 or UN Summit. During the UN Summit, she criticized severely the world leaders over their failures to consider and take sufficient steps in combating climate change (Frazee, 2019). Despite making such an important wake-up call, Thunberg was treated adversely by the President of the United States of America, Donald J. Trump (Lyons, 2019). With the title of “Climate Action Summit 2019: A Race We Can Win”, the UN Summit that was held on 23th of September 2019 at the headquarters of the United Nations, New York aims to push forwards climate action to reduce greenhouse gas emissions. This is necessary to prevent the mean of the global temperature from further increased to more than 1.5 °C (2.7 °F). Such temperature is recognized as above the level of preindustrial requirement. Pursuant to this UN Summit, a global strike for climate change can be traced around the world in support of climate crisis activism. It is recorded that there were six million participants worldwide (Taylor and Bartlett, 2019).

While more pressures were placed on the shoulders of the world's leaders, there was no significant change that happened during the UN Summit. There is no apparent improvement from China on their commitment, with no pledge from India to reduce their dependency on coal, and no significant remark whatsoever from the United States of America. Despite indecisions from those three countries, the UN Summit is still can be considered as a success. By the end of the UN Summit, there are seventy-seven (77) countries make pledges to achieve for net-zero emissions by 2050, and seventy (70) countries agreed to increase their commitments under the Paris Agreement which was concluded in 12th of December 2015.

A positive acceptance can be seen from German, Greek, Russia, and the United Kingdom. Moreover, France, Norway, United Kingdom, Denmark, Sweden and Germany agreed to double up their contributions in providing assistance through the Green Climate Fund to the developing countries in adapting to climate change (Rosane, 2019). Meanwhile, it is recorded approximately eighty-seven (87) global ranked corporate companies such as IKEA, Nestlé, and Burberry agreed to set climate targets consistent with the UN Summit’s goal on the net-zero emission (UN News, 2019). Furthermore, the net-zero emission initiative is consistent with the sustainability notion that propagates through the Sustainable Development Goals (SDGs) which was introduced earlier on, in 2015.

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