GIFIIP’s Green Sukuk Initiative boosts interest among investors for renewable energy projectsMar 8, 2018
IICPSD, under the Global Islamic Finance and Impact Investing Platform (GIFIIP) hosted stakeholders from public and private sector to build greater understanding of the role of Islamic finance in clean energy projects in Turkey. The meeting was organized as the 1st Stakeholder Consultation Meeting for Green Sukuk Initiative launched under GIFIIP. The initiative aims at three main goals: (i) facilitating access to finance for renewable energy projects in developing countries, particularly in the MENA region and OIC countries, (ii) providing financial solutions to environmental issues and (iii) expanding the role of Islamic finance achieving the SDGs.
Green Sukuk Initiative will be piloted in Turkey and then replicated in OIC countries starting with the countries in the MENA Region. The initiative has registered keen interest from the investors. In Turkey, two domestic and one international Green Sukuk issuances are currently under discussion, as an outcome of GIFIIP’S Green Sukuk Initiative.
Representatives from Republic of Turkey Ministry of Energy and Natural Resources, Capital Markets Board of Turkey and Republic of Turkey Prime Ministry Undersecretariat of Treasury participated in the meeting besides private sector representatives. The meeting focused on discussions on both the current landscape of Turkey’s Green Sukuk market and the future opportunities. The meeting offered a unique opportunity to discuss challenges and opportunities regarding the Green Sukuk market in Turkey and to identify potential solutions.
Süleyman Mümin Bulut, Head of Department at the Republic of Turkey, Ministry of Energy and Natural Resources stated that “Turkey’s 2023 goal is to hit 120 GW capacity in renewable energy and reach 30% share in total power generation. Solar energy shows a promising performance to go above this target. As one of the largest importers of oil and natural gas, switching to renewable energy is no longer an option for Turkey, but a necessity. Green Sukuk has the potential to finance the transition process both in domestic markets and in the regional market.” During the meeting, it was acknowledged that there is huge potential to expand the investor base and attract green investors into sukuk issuances. For example, 29% of investors in the Green Sukuk issued in Indonesia, world’s first sovereign Green Sukuk of $1.25 billion, were green-only investors. Sensitivity for green projects is important to expand the Green Sukuk market.
Sukuk are Islamic bonds structured to generate returns in compliance with Sharia law principles. Green Sukuk are asset-based financial instruments for providing funds for renewable energy and environmental projects. Green Sukuk can be used for the same purposes as Green Bonds to fund solar parks, wind energy, etc. Green bonds and green sukuk have been gaining momentum recently. The total global issuance of green bonds increased from US$ 81 billion in 2016 to US$ 155 billion in 2017. The first Green Sukuk, was issued in Malaysia to finance a solar energy project in July 2017.
Global Islamic Finance and Impact Investing Platform (GIFIIP), established by the Islamic Development Bank (IDB) and UNDP’s Istanbul International Center for Private Sector in Development (IICPSD) in 2016, aims to position Islamic finance and impact investing as a leading enabler of global SDG implementation through private sector engagement. Engaging the private sector, governments, and key stakeholders operating in the Islamic finance and impact investing markets, the platform aims to promote market-based solutions to sustainable development challenges by creating a collaborative working space among these actors. A three-pillar strategy has been defined for the advancement of the platform: i) Conceptualization & Capacity Building, (ii) Advocacy & Inter-industry Collaboration and iii) Deal Sourcing & Matchmaking.
UNDP’s Istanbul International Center for Private Sector in Development (IICPSD) is leading the private sector strategy of UNDP, mobilizing private sector to engage in development. IICPSD convenes stakeholders from public and private industry as well as foundations to facilitate knowledge sharing and partnerships, catalyzes private sector actors for developing products and initiatives for SDG implementation and raises capital through deploying blended finance to de-risk financial sector.