{"id":17529,"date":"2021-11-08T19:00:00","date_gmt":"2021-11-08T11:00:00","guid":{"rendered":"https:\/\/www.comparehero.my\/blog\/uncategorized\/socially-responsible-investment-sri-sukuk.html"},"modified":"2026-03-26T16:00:29","modified_gmt":"2026-03-26T08:00:29","slug":"socially-responsible-investment-sri-sukuk","status":"publish","type":"post","link":"https:\/\/www.comparehero.my\/blog\/investments\/socially-responsible-investment-sri-sukuk.html","title":{"rendered":"#InvestInsights: Islamic Financial Planning – Socially Responsible Investing, Green Sukuk And Sukuk Prihatin: Here’s What You Need To Know"},"content":{"rendered":"\n

What is socially responsible investing (SRI) all about? The idea of SRI ties in with sustainable investing, and is closely related to Islamic finance. Most recently, Malaysia\u2019s first digital sukuk, Sukuk Prihatin Islamic bond was introduced as a part of the National Economy Recovery Plan (Penjana). Read more below to find out everything you need to know about SRI and sukuk.<\/strong><\/p> \n

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The value of investments are no longer just measured in returns. Now, an increasingly large number of mainstream investors would prefer to pour their hard-earned money into investments that leave a positive impact on society and the world.<\/p> \n

They do this through sustainable investing, also known as socially responsible investing (SRI), which is the process of incorporating environmental, social and governance (ESG) factors<\/a> into investment decisions. The goal of sustainable investing is to generate measurable social and environmental impact alongside a financial return<\/strong>.<\/p> \n

The rationale of SRIs ties in nicely with Islamic finance, which runs on the principles of fairness, equality and ethics<\/a>, according to the Malaysia International Islamic Financial Centre. Similarly to SRI, Islamic finance, too, seeks social justice and economic prosperity<\/strong> of society as well as encourages sustainable economic activity. The principles of Islamic finance are derived from the fundamental requirements set by the Islamic law also known as Syariah law.<\/p> \n

The significance of SRI is further supported by the Ministry of Finance (MoF)\u2019s recent announcement to issue Sukuk Prihatin<\/a>, Malaysia\u2019s first digital sukuk, amounting to RM500 million under the National Economic Recovery Plan (Penjana). We\u2019ll dive deeper into this later in the article<\/strong>.<\/p> \n

Therefore, understanding the scope and benefits of SRI is pivotal to the wider investing community, particularly Islamic finance practitioners, so they are able to tap into, and access a larger and broader investor portfolio as part of the segment opportunity available in the SRI space due to its overlapping core values.<\/p> \n

What is driving socially responsible investing?<\/h2> \n

The rise of global issues<\/strong> such as climate change, pollution and wasteful use of natural resources have driven consumers to call for greater demand for stronger governance and ethics from businesses.<\/p> \n

Besides that, the high market performance<\/strong> of these sustainable investing products have made it more attractive to investors, who not only see value in generating returns, but also creating impact.<\/p> \n

The demand for sustainable investments is also being driven, in part, by millennials<\/a> who prefer to invest in entities that are aligned with their personal values<\/strong>. And they make up a crucial and emerging segment of the market because they are poised to, according to Ernst and Young, receive more than US$30 trillion<\/a> (RM126 trillion) of inheritable wealth.<\/p> \n

Related:<\/strong> How To Invest RM10,000 & Grow Your Money To RM100,000 In Malaysia<\/a><\/p> \n

Since 2012, SRI instruments have reportedly grown 107.4% annually in the United States, and currently account for 18% of the assets under management (AUM) in the wealth and asset management industry there.<\/p> \n

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Since the issuance of Malaysia\u2019s first corporate sukuk by Shell MDS, worth RM125 million in 1990, the sukuk landscape in Malaysia has continued to thrive thanks to the country\u2019s conducive issuance environment, facilitative policies for investment activities and comprehensive Islamic financial infrastructure. (Image source: MIFC on Bix Malaysia\u2019s website<\/a>)<\/em><\/p> \n

In Malaysia, though still a relatively niche and fledgling market, the demand for and popularity of SRI products has grown over the years since the launch of the Securities Commission\u2019s Sustainable Responsible Investment (SRI) Framework in 2014, said Dr Noor Suhaida Kasri of ISRA Consulting at the 7th MFPC Conference on Islamic wealth management and financial planning.<\/p> \n

The SRI Framework\u2019s launch was quickly followed by the establishment of Malaysia\u2019s first sustainable sukuk in 2015, and first green sukuk in 2017. A sukuk is an Islamic finance certificate<\/a> that represents a portion of ownership in a portfolio of existing or future assets. Think of it as the Islamic version of conventional bonds.<\/p> \n

As the largest issuer of sukuk globally, Malaysia is recognized as the most developed Islamic financial market<\/a> in the world as measured by Thomson Reuters\u2019 Islamic Finance Development Indicator. This measurement is due to Malaysia\u2019s deep domestic market that supports local-currency sukuk issuances.<\/p> \n

Currently, Malaysia accounts for 45% of the sukuk issued<\/a> and is one of the countries where the private sector is a majority issuer of sukuk. Moody\u2019s Investors Service expects Malaysia to continue to dominate global sukuk issuance volumes<\/a> both in the long-term and short-term markets.<\/p> \n

And though Islamic finance has been historically dominated by Muslim-majority countries in Saudi Arabia and Malaysia, the past three years have witnessed an increasing number of issuers from new markets including non-Muslim markets<\/strong>, according to S&P Dow Jones Indices<\/a>. Yes, you heard that right, non-Muslims can invest in Sukuk too.<\/p> \n

The global sukuk market\u2019s tremendous growth since 2013<\/a> is evident by the U.S. dollar-denominated sukuk market which has experienced a compound annualized growth rate of nearly 18% as measured on the Dow Jones Sukuk Total Return Index and the S&P Global High Yield Sukuk Index. This increase is driven by the heightened issuance of sukuk from sovereigns and supranationals, as well as strong investor demand for Shariah-compliant securities.<\/p> \n

\u201cThe mutual fund assets of SRI have increased 34% since 2016 from US$1.72 trillion (RM7.2 trillion) to US$2.58 trillion (RM10.8 trillion) while the total number of SRI mutual funds have increased 50% from 475 to 636. What I am trying to say is there\u2019s a significant move or trend shifting from traditional investment to a specific kind of investment,\u201d said Dr. Ahcene Lahsasna, CEO of Salihin Shariah Advisory at the 7th MFPC Conference on Islamic wealth management and financial planning.<\/p> \n

Though SRI may be associated with other terminologies like community investing, ethical investing, green investing, mission-related investing, responsible investing, and sustainable investing, industry terms such as environmental, social, and governance (ESG) and impact investing actually have distinct features and meaning<\/strong> despite often used interchangeably with SRI by investors and fund managers.<\/p> \n

These differences are important to understand to help structure one\u2019s investment portfolio in order to meet the desired goals.<\/p> \n

What are the differences between SRI, ESG and Impact Investing?<\/h2> \n

SRI<\/h3> \n

There are many definitions floating around the world wide web, but according to Investopedia<\/a>, SRI, is considered socially responsible due to the nature of the business the company conducts. Fund managers in SRI would actively eliminate and select investments<\/a> according to ethical guidelines revolving around personal values, religion and even political beliefs. For investors engaged in socially responsible investing, making a profit is still important, but must be balanced against principles. The end goal is to still generate returns but without violating one\u2019s social conscience. SRIs can be found among individual companies with good social value, or socially conscious mutual funds or exchange-traded funds (ETF).<\/p> \n

ESG<\/h3> \n

This fund looks to environmental, social, and governance practices of an investment to see how they may have an impact on the performance of that investment. Unlike traditional investments, these funds integrate ESG factors<\/a> to enhance traditional financial analysis. Fund managers identify potential risks and opportunities in ESG investments beyond just technical valuations<\/a>. The main objective of ESG valuation remains financial performance.<\/p> \n

Impact Investing<\/h3> \n

Unlike its two counterparts, positive outcomes is the most important factor<\/a> in impact investing. This means investments need to have a positive impact on society and the world in some way. Profitability of the investment may not be the main concern, but a by-product as the objective of impact investing is to help a business or organization accomplish specific goals that are beneficial to society or the environment<\/strong>. One example is to invest in a non-profit organization that is dedicated to eradicating poverty.<\/p> \n

In this article, we will take a closer look at SRIs specifically, and analyze whether or not it’s worth your money.<\/p> \n

Related:<\/strong> 7 Investment Lessons You Should Learn From Successful Investors<\/a><\/p> \n

When it comes to socially responsible investing, it may come in the conventional form of bonds or the Islamic version of sukuk. But what are the differences?<\/p> \n

Differences between bonds and sukuk<\/h2> \n

A bond is a type of investment security where an investor lends money to a company or a government for a given period of time<\/a>, in exchange for regular interest payments. Upon maturity, the bond issuer returns the investor\u2019s money, and profits are generated via fixed payments that an investor receives over the life of the bond.<\/p> \n

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Sukuk holders will receive a certificate from the issuer as evidence of ownership and are entitled to receive periodic profit payments on the principal amount invested. The sukuk holder will get back the principal amount of investment upon its maturity. (Image source: BixMalaysia<\/a>)<\/em><\/p> \n

Similar to a bond in Western finance, a sukuk<\/strong> is an Islamic financial certificate that complies with Islamic religious Syariah law. This is an alternative for Muslim investors who are not able to invest in the traditional Western interest-paying bond structure. How does it work? According to Investopedia<\/a>, the issuer of a sukuk sells investors a certificate, and then uses the proceeds to purchase an asset, of which the investors would have partial ownership.<\/p> \n

At this juncture, three types of sustainable bonds and sukuk are offered in Malaysia including green, social, and sustainable bonds\/sukuk. But what\u2019s the difference between the three and how do they really work?<\/p> \n

Green bond and sukuk<\/strong> – Proceeds from green bonds and sukuk are used to fund environmentally friendly projects like renewable energy and climate change.<\/p> \n

Social bond and sukuk<\/strong> – Proceeds are used to raise funds for projects with positive socio-economic outcomes for an identified target population. Some examples include food security and access to healthcare and education.<\/p> \n

Sustainability bond and sukuk<\/strong> – Proceeds are used to raise funds for projects that bring clear environmental and social-economic benefits. At the same time, their financial and\/or structural characteristics vary depending on the issuer’s ability to achieve predefined sustainability\/ESG objectives<\/a>.<\/p> \n

The Sukuk Prihatin programme 2020 – the first digital sukuk<\/h2> \n

Touted as the first ever digital sukuk in Malaysia, the programme was launched on August 18 as part of the government\u2019s National Economic Recovery Plan (Penjana).<\/p> \n

Based on the Syariah principle of Tawarruq via the Commodity Murabahah arrangement, it is open to all Malaysians aged 18 and above. The sukuk has a total target issuance of RM500 million with a maturity period of two years.<\/p> \n

Details of the sukuk: <\/strong><\/p> \n