Launch Partners

Saturday, May 25, 2024

Launch Partners

CIMB Islamic Report

CIMB Group (the Group) is a leading ASEAN universal bank and one of the region’s foremost corporate advisors. It is also a world leader in Islamic finance. The Group is headquartered in Kuala Lumpur, Malaysia and offers consumer banking, commercial banking, investment banking, Islamic banking and asset management products and services.

As a leading ASEAN bank, our greater purpose is to advance customers and society toward a sustainable future. In line with this, we integrate economic, environmental and social (EES) considerations into all aspects of our business.

Our strategy is two-pronged. We commit to investing resources and influencing networks to reduce negative EES impacts. We also aspire to create a net positive impact through our business activities.

Sustainability is one of the key elements of our strategic theme to become a purpose-driven organization. As we strive to be a top quartile bank in ASEAN under our Forward23+ strategy, we target to achieve the 75th percentile of the Dow Jones Sustainability Index ranking by 2024.

Based on our 2020 performance, we are now at 79th percentile of these rankings, achieving this target three years ahead of time.

We are the first banking group in Malaysia and the first in Southeast Asia to commit to phasing out coal from its portfolio by 2040, with no new coal/coal-fired power plant-related financing by 2021 onwards.

Our recent commitments are:
• Net zero by 2050, no deforestation, no peat and no exploitation, and
• RM30 billion (US$7.09 billion) in sustainable finance, RM150 million (US$35.46 million) in corporate social responsibility by 2025 and 100,000 annual volunteering hours.

As a regular issuer in the bond and Sukuk market, we strive to ensure our instruments and frameworks continue to reflect the latest sustainability commitments of the Group, and market standards as well as expectations. In this regard, we have decided to update the SDG Bond Framework in 2021 and effect the following changes:
• Insertion of a Sukuk component to allow for future issuances of Shariah compliant notes
• Consolidation of the SDG Bond and Sukuk Framework under the Group, ie CIMB and its subsidiaries including but not limited to CIMB Bank could use the SDG Bond and Sukuk Framework as the basis for future sustainability bonds and/or Sukuk to be issued on and after the 18th October 2021, and
• Inclusion of new forms of eligible assets that could qualify for the use of proceeds of the future sustainability bonds and/or Sukuk by the Group.

CIMB Islamic have been at the forefront of Islamic and Sustainable financing and would like to highlight just two of our recent transactions as follows.

Indonesia’s US$3 billion Sukuk issuance features landmark green tranche

The Indonesian government in June 2021 issued a landmark Sukuk issuance worth a total of US$3 billion, featuring a green Sukuk tranche that is touted as the first-ever 30-year and longest-tenored green Sukuk issuance globally. The global Islamic trust certificates were issued in three tranches: a five-year US$1.25 billion facility; a 10-year paper worth US$1 billion; and a 30-year green Sukuk facility worth US$750 million.The landmark green Sukuk tranche is the government’s fourth global green Sukuk issuance under its Green Bond and Sukuk Framework since the debut paper in 2018, but is the first with a 30-year tenor — globally the longest tenor for an issuance of its kind. “The global Sukuk issuance is aligned with the Republic of Indonesia’s strategy to strengthen its position as a leader in the global Islamic financial markets, with the green Sukuk being a testimony of its dedication and long-term commitment to green and sustainable financing,” CIMB Bank, the lead arranger and bookrunner of the transaction, said. The offering garnered robust demand, receiving a final orderbook of US$10.3 billion, reflecting an oversubscription of 3.43 times that resulted in the final pricing going below the fair value across all three tranches. According to CIMB Bank, the issuance also achieved the lowest-ever five-year, 10-year and 30-year yield spread over the US Treasury and profit rate achieved by the Indonesian government for an international Sukuk paper.Indonesia’s Sukuk US$3 billion Indonesia’s Sukuk 9th June 2021 Issuer Perusahaan Penerbit SBSN Indonesia III Obligor Republic of Indonesia Issue size Tranche 1: US$1.25 billion Tranche 2: US$1 billion Tranche 3: US$750 million Structure Tranche 1 and 2: Sukuk Wakalah Tranche 3: Green Sukuk Wakalah Maturity date Tranche 1: 9th June 2026 Tranche 2: 9th June 2031 Tranche 3: 9th June 2051 Yield/periodic distribution rate Tranche 1: 1.5% pa Tranche 2: 2.55% pa Tranche 3: 3.55% pa Listing Singapore Exchange; NASDAQ Dubai Governing law English law; Indonesian law for asset-related documents Joint lead managers and bookrunners CIMB Bank; Citibank; Dubai Islamic Bank; HSBC; Standard Chartered Joint green structuring advisors HSBC; Standard Chartered Co-managers BRI Danareksa Sekuritas; Trimegah Sekuritas Indonesia

Malaysia anchors Islamic finance leadership with upsized debut sovereign sustainability Sukuk

The Malaysian government upsized its debut sovereign sustainability Sukuk — also the world’s first — from its initial target size of US$1 billion to US$1.3 billion following strong demand confirmed by an oversubscription of 6.4 times.

The US dollar sustainability Sukuk facility is comprised of US$800 million 10-year trust certificates carrying a 2.07% profit rate and US$500 million 30-year trust certificates with a 3.08% profit rate — the lowest-ever yield for a US dollar Sukuk issuance by Malaysia.

The warm reception to the issuance is, according to the government, a “vote of confidence in the country’s policies and strong economic fundamentals”. The investor pool was made up of fund managers, banks, insurance companies, central banks and governments and other investors from Asia, Europe, the Middle East and Africa and the US.

Supporting the green Sukuk is the government’s Sustainable Development Goals (SDGs) Sukuk Framework, which aligns issuances with the Green Bond and Sustainability Bond Principles and Standards of the International Capital Market Association and the ASEAN Capital Markets Forum.

The Ministry of Finance will manage the proceeds, which will be used to fund social and environmental projects in support of the government’s efforts to combat climate change and build a more resilient and inclusive economy.

In particular, the essential service categories of healthcare, education, affordable infrastructure, employment generation through SMEs, clean transportation, renewable energy and green buildings and the sustainable management of natural resources will take center stage.

Also, a unique highlight of the Islamic paper is that its underlying assets are sustainable: vouchers for travel entitlement on Malaysia’s Light Rail Transit, Mass Rapid Transit and KL Monorail networks. “As the first sovereign issuance with such assets in a Sukuk structure, this issuance sets a new benchmark and showcases Malaysia’s global leadership in Islamic finance, reinforcing the country’s position as the world’s largest Sukuk market,” the Ministry of Finance said.

The Sukuk facility, rated ‘A3’ by Moody’s Investors Service, was issued by the government’s SPV, Malaysia Wakala Sukuk, and approved by the Shariah boards of its joint bookrunners and lead managers which included CIMB Islamic Bank.

The success of Malaysia’s sustainability Sukuk mirrors that of its Sukuk Prihatin initiative in 2020, the proceeds of which were used to combat the impact of COVID-19.

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