CIMB Islamic leads landmark RM1.0 billion sustainable Shariah-compliant Collateralised Commodity Murabahah transaction with Standard Chartered Saadiq

20 June 2022

Kuala Lumpur: CIMB Islamic Bank Berhad (“CIMB Islamic”) announced today that it has entered into an RM1.0 billion landmark Sustainable Collateralised Commodity Murabahah (“CCM”) transaction with Standard Chartered Saadiq Malaysia, further enhancing its market leadership position in sustainable finance, as well as Islamic treasury and capital markets.

CCM is a Shariah-compliant financial instrument to obtain efficient funding secured by high quality Islamic sukuk assets. The development of liquid secured funding on sukuk has been historically challenged by the inability to have efficient counterparty risk management features, as well as collateral substitution flexibility. With the CCM, the Islamic financial market is provided with a viable alternative to the conventional Repurchase/Reverse-Repurchase Agreements (Repo/Reverse Repo).

All transaction proceeds of the CCM will be earmarked to eligible Shariah-compliant assets/projects that fall within the boundaries of CIMB Group’s Sustainable Development Goals (“SDG”) Bond and Sukuk Framework. These may include assets/projects that aim to generate positive social impacts for vulnerable segments, such as affordable housing, start-ups and SMEs, public schools, as well as positive environmental impacts via projects such as green mass transit, climate resilient buildings and infrastructure, sustainable forestry and wildlife conservation projects.

“Given Malaysia’s strong global leadership position in Islamic finance and sukuk market development, efficient and liquid secured funding is expected to further enhance the vibrancy and resiliency of the financial markets. A secured funding instrument such as the CCM is also crucial for most central banks with open market operations to adjust liquidity in the financial system. CIMB is pleased to be at the forefront in providing sustainable treasury solutions to its clients and to lead this initiative with support from industry groups such as the Financial Markets Association of Malaysia (“FMAM”) and Association of Islamic Banking and Financial Institutions Malaysia (“AIBIM”). We are very happy to partner with Standard Chartered Saadiq Malaysia to enable the landmark sustainable CCM transaction,” said Ahmad Shahriman Mohd Shariff, Chief Executive Officer of CIMB Islamic.

“The successful execution of this transaction is a testament to our expertise in Islamic treasury solutions and commitment towards sustainable finance, aligned with the practices of value-based intermediation. We are keen to work closely with our clients to introduce more innovative treasury transactions such as sustainable or sustainability-linked secured funding instruments to the market,” added Shahriman.

“We are pleased to work with a like-minded partner like CIMB who is known for their commitment to the development of financial markets products as well as their dedication towards sustainability in Malaysia. This deal underpins both banks’ devotion to continue the innovative development in the environmental, social and governance (“ESG”) space as well as our common objectives to further advance the suite of Shariah-compliant products,” said Mohd Suhaimi Abdul Hamid, Chief Executive Officer of Standard Chartered Saadiq Malaysia.

“This landmark transaction aligns with our global commitment to become the world’s most responsible and sustainable bank and Saadiq’s aspiration to be the most sustainable international Islamic bank. We aspire to lead in ESG product development, with Saadiq continuing to offer innovative Islamic solutions that leverage on its international Islamic banking network across Asia, Africa and the Middle East. With the Islamic finance industry taking the lead in integrating value-based intermediation into its practices and focusing on Shariah-compliant solutions that align with the United Nations’ SDGs and ESG, this inaugural transaction further strengthens Malaysia’s position as an international Islamic financial hub,” Suhaimi added.

Witnessing the event was Adnan Zaylani Mohamad Zahid, Assistant Governor of Bank Negara Malaysia, who notes that the Islamic finance industry is in a strong position to facilitate the transition towards sustainable practices. “The industry has an encouraging track record in the sustainable finance space, as evident from the sovereign and corporate sustainability sukuk issuances to finance green and social-related projects."

“Islamic financial institutions play a major role in driving the sustainability agenda in Malaysia hence, it is encouraging to see players such as CIMB Islamic and Standard Chartered Saadiq Malaysia keep the momentum going with this landmark deal which furthers the Islamic and ESG convergence. I’m confident the Islamic finance sector will continue to do more in advancing sustainability practices by leading ESG innovations aligned to the value-based intermediation agenda."

As a purpose driven organisation and in line with its Forward23+ strategic plan, CIMB Group is continuously stepping up on sustainability innovation, in order to achieve its ambition to become a leading focused ASEAN bank and a sustainability leader. These include the Group’s commitment to achieving Net Zero greenhouse gas (“GHG”) emissions, including Scope 3 financed emissions by 2050, as well as its target to mobilise RM30 billion in sustainable finance under its Green, Social, Sustainable Impact Products and Services (“GSSIPS”) Framework by 2024.

Both CIMB and Standard Chartered share a long history of partnership, having collaborated on many firsts in the market. These include the landmark MYR2.45 billion sustainability-linked derivative transaction – the world’s first Malaysian Ringgit-denominated transaction of its kind and Asia’s largest ESG-linked derivative trade when it was issued in October 2021. Standard Chartered Bank was also a Joint Lead Manager for the Sustainable Taiwanese Formosa Bond and US 144A Sustainable Bond issuances by CIMB, both of which were landmark maiden capital market trades for Malaysia.