SRI Sukuk

Global acceptance of Islamic investment as part of the sustainable investment universe has created significant opportunities for Islamic finance. This is particularly so in driving the development of innovative funding instruments that support global demand for sustainable development projects. Sukuk as a funding instrument has gained widespread appeal in Malaysia, following the introduction of the Sustainable and Responsible Investment (SRI) Sukuk Framework by the Securities Commission Malaysia (SC) in 2014.

The launch of the SRI Sukuk Framework aligns with the initiatives under the SC’s Capital Market Masterplan 2, to promote socially responsible financing and investment. It represents part of the SC’s developmental agenda to facilitate a conducive eco-system for SRI investors and issuers, and is also in sync with the rising global trend of green bonds and social impact bonds to promote sustainable and responsible investing. Proceeds from SRI will be applied exclusively to the funding of activities or transactions pertaining to eligible SRI projects.

Achieving Milestones

The SRI Sukuk Framework has enabled Malaysian entities to issue SRI sukuk in the form of green, sustainable and social sukuk. In 2017, Malaysia issued the world’s first green SRI sukuk – to finance the construction of large-scale solar photovoltaic power plants in Kudat, Sabah.

 In June 2022, the SC introduced the Sustainable and Responsible Investment linked (SRI-linked) Sukuk Framework (SRI-Linked Framework), with the goal of enabling companies to raise funds to tackle sustainability concerns such as climate change or social agenda. Such funds would entail features that are connected to the issuer’s sustainability performance commitments. Moreover, SRI-linked sukuk will enable companies in the relevant sectors to transition to a low-carbon or net zero economy. The SRI-Linked Framework represents an extension of the initiatives under the SRI Roadmap, which was unveiled in 2019 to amplify the range of SRI products. It also underlines the SC’s commitment to extending the reach of the Islamic capital market (ICM) to the broader stakeholders while developing an enabling ICM ecosystem for the sustainability thrust. 

Notably, RM10.58 billion of SRI sukuk was issued in Malaysia in 2022. This brough the cumulative amount of SRI sukuk issuance under the SRI Sukuk Framework to RM18.92 billion since its debut in 2014. Of this, some RM16.58 billion was recognised under both the SRI Sukuk Framework and the ASEAN Standards. Issuances from Malaysia made up about 24% of the total issued under the ASEAN Standards.

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An interesting trend that has been a boon for the sukuk market in recent years is the uptick in environmental, social and governance (ESG)-related sukuk. While there have been issuances of sustainability conventional bonds or green sukuk, the Government of Malaysia (GoM)’s sukuk issuance on 28 April 2021 marked the first global sustainability sukuk, when Malaysia issued its first sustainability Islamic trust certificates, comprising an USD800 million 10-year tranche (sustainability sukuk) and a USD500 million 30-year tranche. This maiden issuance via a special-purpose vehicle — Malaysia Wakala Sukuk — is in line with the GoM’s recently launched Sustainability Development Goals (SDGs) Sukuk Framework.

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This issuance aligns with the ASEAN Sustainability Bond Standards and underlines the Government’s key role in driving Malaysia’s sustainability agenda. The sukuk proceeds will be used for eligible social and green projects that uphold the SDGs, and which will also contribute to the country’s socioeconomic development. Notably, the 10-year sukuk attracted a diverse pool of investors, with 55% of the principal amount distributed to Asia, 33% to Europe, the Middle East and Africa (EMEA), and 12% to the US. Meanwhile, some 46% of the principal amount of the 30-year sukuk was channelled to Asia, followed by EMEA (33%) and the US (21%).

In terms of investor type, about 67% of the 10-year sukuk comprised fund managers and insurance companies, with central banks and governments taking up 18%, banks another 14% and other investors, 1%. As for the 30-year tranche, some 83% is attributable to fund managers, 10% to banks, 4% to central banks and governments, and 3% to other investors.

Why SRI Sukuk
Tax Incentives on SRI Sukuk and Bond Issuances

In general, tax deductions are applicable to issuance expenditure for all types of bonds and sukuk that achieve green, social and sustainable standards in Malaysia – as approved by the SC – until Year of Assessment (YA) 2023.

SRI Sukuk and Bond Grant Scheme

As part of ongoing efforts to encourage green financing, the SC established the SRI Sukuk and Bond Grant Scheme (the Scheme, formerly known as the Green SRI Sukuk Grant Scheme) in 2018. The Scheme covers up to 90% of the costs incurred by issuers on independent expert reviews of sustainable sukuk issuances under the SC’s SRI Sukuk Framework and bonds issued in Malaysia under the ASEAN Green, Social and Sustainability Bond Standards and SRI-linked Sukuk under the SRI-linked Sukuk Framework or bonds issued under the ASEAN Sustainability-Linked Bond Standards. As of June 2022, it had benefited 15 issuers involved in renewable energy, green building, and sustainable projects.

In August 2022, the SC expanded the Scheme to include SRI-linked sukuk issued under its SRI -Linked Sukuk Framework (announced in June 2022). This now renders SRI-linked sukuk issuers to also be eligible for the same benefits as those enjoyed under the SRI Sukuk Framework. The move is in line with the Capital Market Masterplan 3 emphasis on transition finance that will support Malaysia’s commitments and aspirations vis-à-vis changing to a low-carbon and climate-resilient economy. It aspires to encourage the issuance of SRI-linked sukuk by corporates in carbon-intensive industries, as they transition to better sustainability practices and low-carbon activities.


To encourage eligible issuers by defraying the external review costs of sukuk issuance under the SC’s SRI Sukuk Framework, ASEAN Bonds under the ASEAN Standards and SRI-linked Sukuk under the SRI-linked Sukuk Framework.


Issuers can claim for the grant based on an issue or programme. If another issuance requires a separate external review, the issuer will also be able to claim on that review cost.


As announced under Budget 2021, income tax exemptions are available to recipients of the SRI Sukuk and Bond Grant Scheme, for five years from Year of Assessment (YA) 2021 to YA 2025.


Ninety percent (90%) of the actual external review cost, subject to a maximum of RM300,000 per issuance.


SRI-linked sukuk issuances made under the SC’s SRI-Linked Sukuk Framework from 8 August 2022 onwards. Apply Now.