Sustainable Finance: Can Sukuk Become a Driver of Solar and Green Energy Growth?

The drive to promote green energy in many countries, together with reducing solar technology costs and maturing practices, have attracted strategic investors into the sector primarily driven by return and sustainable investment principles. Owing to such factors, almost all countries analyzed are either increasing their current solar capacities or installing new plants to achieve their clearly set energy efficiency strategies.

Countries such as Malaysia and Indonesia, which are considered highly coal-dependent economies, have started to drastically decrease their government-sponsored subsidies towards conventional energy sources to drive their focus towards non-conventional sources, with solar being the prime focus.

With such a focused approach by various governments, the majority of the group countries researched have seen a rising trend in investments through both conventional and Islamic finance methods primarily driven by international developers and strategic national investors. This has also encouraged many other investors to engage in large-scale solar and green energy projects, thereby enjoying benefits offered by their respective governments.

Over the years, and in particular in the markets we considered, Islamic finance has emerged as a key player to fund social and infrastructure projects and offers various innovative Shariah-compliant structures to both large and small-scale enterprises in different sectors of the economies. Evidently, these structures are also used in financing several major solar projects in the Middle East and North Africa (MENA), Asia and Europe.

This report provides an in-depth analysis of the key driving factors of going green in these selected groups of countries and discusses the value proposition of Islamic financing strategy, as well as presents anchor transactions and structures used in these countries.

The analysis also covers the global energy landscape and concludes with discussions on regulatory and investment policy support in these group countries. A summary of the industry outlook is presented addressing the various challenges and opportunities faced by solar developers and investors which could help improve business practices and investment strategies.