MARC Ratings has assigned a “Silver” Sustainability Sukuk Assessment to MBSB Bank Berhad’s ASEAN Sustainable and Responsible Investment (SRI) Sustainability Sukuk Framework (the Framework). The Framework identifies a total of 13 Eligible Categories, each of which contributes to one or more sustainability objectives and United Nations’ Sustainable Development Goals (SDGs). MARC Ratings is of the opinion that the Framework is aligned with the core components of the ASEAN Sustainability Bond Standards, the ASEAN Green Bond Standards and the ASEAN Social Bond Standards (collectively, the ASEAN Standards) in addition to the Securities Commission Malaysia’s SRI Sukuk Framework.

Eligible Categories under the Framework include renewable energy, clean transportation, green buildings, energy efficiency, sustainable waste and wastewater management, waste and pollution control, affordable basic infrastructure, accessible healthcare, vocational training, education, financing and financial services, employment generation, affordable housing, and food security and sustainable food systems. MARC Ratings understands that only 20% of this represents new financing areas for the bank. The Framework is coherent with MBSB Bank’s “Building Malaysia” sustainability strategy that is geared towards fostering customers’ financial resilience and its “Journey 25” aspiration to become a fully matured Islamic financial institution by year 2025.

The Eligible Asset categories and specified Eligibility Criteria align with the green and social eligible project categories recognised by the ASEAN Standards and SRI Sukuk Framework. Apart from asset and project specific financing, general financing is also eligible for inclusion under the Framework if at least 67% of the financing recipient’s revenue or total assets, whichever is higher, fall within the Framework’s Eligible Categories and meet the corresponding eligibility criteria. The Framework has been drawn up to accommodate the refinancing and renewal of existing general financing to financing recipients with substantial activities in the Eligible Categories given that the bank is still in the relatively early stage of its sustainability journey with regard to building its sustainable financing portfolio.

The Silver assessment is supported by the bank’s Environmental, Social, and Governance (ESG) risk screening process and exclusion criteria which provide assurance that the Sustainability Sukuk proceeds will not be allocated to sensitive sectors or activities with negative environmental and social impacts. Further, MARC Ratings assesses sustainability management and sustainability integration within the bank to be at an intermediate level of maturity. The bank appears to be transitioning from a largely compliance and risk management approach to a more strategic approach to drive differentiation and value creation, consistent with its Value-Based Intermediation objectives and vision of becoming a top progressive Islamic bank.

MBSB Bank is a wholly-owned subsidiary of the Malaysia Building Society Berhad (MBSB) which, in turn, is a subsidiary of the Employees Provident Fund (EPF). MBSB Bank was created from the merger of MBSB’s operations with Asian Finance Bank Berhad (AFB) and the transfer of MBSB’s Shariah-compliant assets and liabilities to AFB, which was then renamed and rebranded as MBSB Bank. MBSB Bank currently provides Shariah-compliant business banking, trade financing and consumer banking services to an active customer base of over 300,000 through 47 branches nationwide in the northern region, central region, southern region, east coast, Sabah, and Sarawak.

The full Sustainability Sukuk Assessment can be accessed at  here.