HSBC Amanah prints world’s first SDG sukuk

The offering was issued based on the existing HSBC Group SDG bond framework and the proceeds will be used to support projects contributing towards the UN SDGs

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HSBC Amanah Malaysia has launched the world's first United Nations Sustainable Development Goals (SDG) sukuk, marking a milestone in aligning Islamic finance with the SDGs.

The transaction, announced on October 3, was for 500 million ringgit (US$120.57 million) for five years. It has a fixed profit rate of 4.30% per annum, or at the tight end of the initial price guidance of between 4.30% and 4.40%. It represented the lowest coupon for a five-year non-government guaranteed sukuk/bond in the ringgit market so far this year.

It was also the tightest spread over the benchmark Malaysian government securities for a financial institution since 2013, and for an Islamic bank in the ringgit market since HSBC Amanah's inaugural ringgit sukuk was launched in 2012.

The transaction, which was priced on September 20, was the second SDG issuance from an HSBC entity globally, following the group's US$1 billion SDG bond in 2017, and this move remains in line with the group's commitment to provide US$100 billion in sustainable financing and investment by 2025. The goal is one of five new commitments that HSBC has made to tackle climate change and support sustainable growth in the communities where the organization serves.

As HSBC Bank Malaysia group general manager and CEO Stuart Milne points out, this development represents the world's first ever benchmark sustainable sukuk issuance by a financial institution referencing the UN SDGs as use of proceeds. The offering was issued based on the existing HSBC Group SDG bond framework and the proceeds will be used to support projects contributing towards the UN SDGs, such as: good health and well-being; quality education; clean water and sanitation; affordable and clean energy; industry, innovation and infrastructure; sustainable cities and communities; and climate action.

HSBC Amanah CEO Arsalaan Ahmed says the landmark issuance was also in line with the newly-developed value-based intermediation (VBI) initiative championed by Bank Negara Malaysia, which seeks to shift the focus of the Islamic finance industry to integrate environmental and social tenets into banking activities.

Rated AAA by RAM Rating Services, the sukuk was drawn from HSBC Amanah's existing multi-currency sukuk programme amounting to 3 billion ringgit. The issuance garnered strong investor demand, with the final order book in excess of 1.4 billion ringgit and a bid-to-cover ratio of 2.85x from 25 accounts. By type of investors, government agencies and pension funds accounted for 51% of the paper, financial institutions 31%, insurance companies 9%, asset managers 8%, and corporates 1%.

HSBC Amanah acted as the sole lead arranger and sole SDG structuring adviser for the transaction, as well as a joint lead manager together with Maybank Investment Bank and RHB Islamic Bank.

Date

5 Oct 2018

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