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Tuesday, November 29, 2022

Launch Partners

PODCAST: Cagamas doubles down on sustainability agenda; working on framework to scale up green housing

Malaysia’s second-largest issuer of corporate debt, Cagamas, intends to devise a framework to serve as guidance for property ecosystem stakeholders to boost the domestic green housing sector.

“Our stakeholders, including shareholders, would fully appreciate the fact that Cagamas is actually playing a significant role in trying to support this overall [green housing] agenda, as well as the strategic direction for Cagamas moving forward, embarking on a building-block approach in terms of the green housing agenda. Meaning, we would like to put in place a framework in which developers, financial institutions as well as buyers will be able to use in terms of fulfilling their obligations,” shared Chung Chee Leong, the president/CEO of Cagamas, with IFN. “We will look at how we can help developers build more green-certified houses, how we can see financial institutions give out more green mortgages and how house buyers would benefit ultimately with perhaps lower costs of borrowing as well as lower utility costs and other costs.”

Just last month, Chung at Islamic Sustainable Finance and Investment Forum 2022 at the Securities Commission Malaysia revealed that it is working on taxonomy for the green housing sector.

The national mortgage corporation is working toward achieving 10% in green assets on its balance sheet by 2030. To date, it has issued a total of RM1.7 billion (US$359.36 million) in sustainability-related bonds and Sukuk under its Sustainability Bond/Sukuk Framework. The firm intends to tap the green Sukuk and bond market to fund its stakeholders for the purpose of developing and financing green residential housing with a potential carved out for female-headed households.

Cagamas is currently undertaking a research study on the challenges for scaling up green residential mortgages in Malaysia, including for the affordable housing segment and housing in smaller towns. Asian Development Bank is providing the corporation technical assistance for the study, which is expected to be completed by October 2023. Cagamas hopes to use the findings from the research to shape its future green Sukuk/bond offerings.

“Financial institutions or Islamic financial institutions need to, to some extent, provide advisory and help its borrowers in terms of meeting their obligations. In the case of sustainability, I think financial institutions should also play a role in terms of helping their borrowers transition into this low-carbon economy,” according to Chung.

Cagamas’s assertive green stance is in line with the national agenda: Malaysia plans to be a carbon-neutral nation by 2050. To meet this target, environmental NGO WWF-Malaysia and Boston Consulting Group noted in a joint study that the country would need an investment of RM350–450 billion (US$73.99–95.13 billion) over the 2030–50 period.

This is an excerpt of a podcast episode with Chung Chee Leong, the president/CEO of Cagamas as part of a special sustainability podcast series in conjunction with Cagamas’s 35th anniversary. To listen to the full discussion, log on to IFN OnAir.

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