Islamic Development Bank Achieves New Milestone with Debut Green Sukuk Worth EUR 1 Billion for Green Financing in its Member Countries

27 November 2019 - The Islamic Development Bank (IsDB), rated Aaa/AAA/AAA by Moody’s, S&P and Fitch (all stable outlook), has successfully priced, today, its first-ever Green Sukuk. The supranational raised EUR 1 billion in 5-year Trust Certificates under its US$25 billion Trust Certificate Issuance Programme. The Sukuk was priced at par with a profit rate of 0.037%, to be payable on annual basis, making it the lowest ever profit rate for a Euro issuance by the Bank. This is IsDB’s third public issuance in 2019.

The Joint Lead Managers and Joint Bookrunners for this issuance are Citi, First Abu Dhabi Bank, HSBC, Landesbank Baden-Württemberg, Natixis, Société Générale, Warba Bank, and Standard Chartered Bank.

Proceeds from the debut Green issuance will be deployed by IsDB towards a range of climate-change and green projects in its 57-Member Countries. These include projects for renewable energy, clean transportation, energy efficiency, pollution prevention and control, environmentally sustainable management of natural living resources and land use and sustainable water and wastewater management.

The landmark issuance, which was announced by Dr. Bandar Hajjar, IsDB President, at the IsDB Sukuk Summit 2019 in Luxembourg in early November, is the inaugural trade based on the Bank’s recently created Sustainable Finance Framework and is also the first ever AAA-rated Green Sukuk in the global capital markets.

The Framework, which was created in line with the IsDB President Five-Year Program (P5P), lays the foundation for the issuance of Green and Sustainable Sukuk by IsDB in order to attract Socially Responsible Investors as well as environmentally-conscious ones across the globe for financing the SDGs in the IsDB Member Countries.

The roadshow was conducted in the week of 18-22 November in London, Paris, Amsterdam, and Frankfurt. With book-building beginning on Tuesday, September 26th, the initial price thoughts were set at Mid Swap (MS) plus 31 (bps) area. Following a strong demand from investors, the deal was eventually priced at MS plus 28bps, with an overall profit rate of 0.037% compared to IsDB’s Euro issuance last year which had a profit rate of 0.554%.

In terms of the final allocation, the distribution was well diversified with 51% allocated to Middle East & North Africa, 38% to Europe, 6% to Asia and 5% to others. Overall, the deal witnessed strong participation from real money accounts and official institutions, a testament of IsDB’s credit strength, as 61% was allocated to bank treasuries, fund managers and private banks and 39% to central banks and official institutions.

The Trust Certificates will be listed on Euronext Dublin, NASDAQ Dubai and Bursa Malaysia (under the Exempt Regime).

Following the successful pricing, H.E. Dr. Bandar Hajjar, President of IsDB Group, commented: “With this landmark Green Sukuk, IsDB has reaffirmed its longstanding commitment to play a catalytic role in efficiently mobilizing resources for core SDG sectors in our Member Countries, thereby helping them to progress towards achieving the SDGs. We are very pleased with the outcome of the deal in terms of size, lower pricing and a high number of diversified investors. We are also happy to see new investors subscribing to IsDB Sukuk. I would like to thank the IsDB’s Member Countries and all the investors for their trust in IsDB and its mission. We look forward to further harnessing the capital markets to mobilize resources through more innovative transactions in the future.”

Moreover, Mr. Yves Jacob,  Global Head of Public Sector Coverage at Société Générale, stated: “Through this landmark Green Sukuk issuance, the first ever of its kind by a supranational issuer, the Islamic Development Bank (IsDB) has demonstrated the power of capital markets in channeling responsible capital towards the financing of sustainable development projects. As one of the lead managers of the transaction, Société Générale was extremely proud in assisting the finance team of IsDB in connecting with Euro-based and Socially Responsible Investment (SRI) investors and helping them understand how Islamic finance can be used as an innovative financial tool to support green projects. The success of the transaction is a solid testimony of the strength and standing of the IsDB Group, the professionalism of its teams, and the robustness of its newly established Sustainable Finance Framework. We, Société Générale, are delighted to have assisted in a successful capital raising that will contribute to the many ongoing positive transformations in IsDB’s Member Countries.”