Who introduced the framework, and why?
The Securities Commission Malaysia (SC) launched the framework on 28 August 2014 to facilitate financing for sustainable and responsible investment initiatives. Its original announcement explains the environmental and social purpose, demand for stronger governance and ethics, and intention to widen participation by retail and sophisticated investors. SC's original launch announcement.
The SC enhanced the provisions in November 2019. Its 2019 overview is useful historical background. For a new proposal, use the current guidelines below.
Which rules apply to your issuance?
An issuer is the entity issuing the sukuk to raise money. Your arranger helps structure and place the financing with investors. Establish the issuer and intended investor group early. Unlisted describes securities that are not listed on a stock exchange; retail describes the investor audience. Your advisers need to identify the applicable issuance route. ASEAN, the Association of Southeast Asian Nations, also has regional labels discussed below.
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| Route to discuss | Current SC document checked | Relevant framework chapters |
|---|---|---|
| Unlisted corporate sukuk under the ordinary Lodge and Launch route, for the specified investor categories | Unlisted Capital Market Products guidelines, revised and effective 30 March 2026 | Section B, Part 3: Chapter 7 for SRI sukuk; Chapter 8 for ASEAN project labels; Chapter 9 for SRI-linked sukuk; Chapter 10 for ASEAN linked labels |
| Sukuk offered to retail investors—the wider investor public | Retail corporate-bond and sukuk guidelines, revised and effective 28 November 2024 | Part F: Chapters 21, 22, 23 and 24 respectively |
These are additional framework provisions. The SRI label may be used only where the issuance complies with the applicable guidelines. Have your legal adviser map issuer eligibility, investor restrictions, disclosures, rating and trustee arrangements, submissions and any exemptions. A special issuance route may have different treatment. Lodge and Launch involves lodging specified information and documents with the SC; that lodgement is not an endorsement of the investment.
The Islamic Capital Market Products and Services guidelines, revised 30 March 2026, also apply as relevant. Your Shariah adviser should establish the structure, documentation and endorsement requirements. Shariah compliance and qualification for an SRI label each need attention.
Which project purposes can qualify?
The framework covers environmental protection, energy conservation, renewable energy, lower greenhouse gas emissions and positive social outcomes. The project categories are broad and non-exhaustive; your proposal still needs a reasoned eligibility assessment.
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| Purpose | Areas to investigate | Evidence you could begin gathering |
|---|---|---|
| Environmental | Renewable energy; energy efficiency; pollution control; sustainable land and natural-resource management; biodiversity; clean transport; water and wastewater; climate adaptation; resource-efficient and circular production; green buildings meeting recognised standards or certifications | Technical scope, current performance, intended improvement, permissions, relevant standards and material risks |
| Social | Affordable infrastructure; essential services; affordable housing; employment, including the potential contribution of small and medium enterprise (SME) financing and microfinance, or small-scale financial services; food security; social and economic advancement | The access or social problem, intended beneficiaries, affordability or access criteria, delivery plan and outcome data |
| Combined purposes | Eligible environmental and social projects together | A clear assessment and spending plan for each purpose |
| Waqf development | Development of waqf properties or assets; waqf refers to an Islamic endowment | Asset status, development purpose and advice on the relevant legal and Shariah arrangements |
See SC's unlisted rules, 7.07–7.08, and retail rules, 21.07–21.08.
A target population means the people a social project aims to help. The SC describes social outcomes as especially, but not exclusively, for a target population. Explain who needs the service and how you'll reach them. A clinic, housing development or SME funding programme needs more than its sector name to support the social case.
1. Explain how the raised money will be used
Proceeds means the money raised through the issuance. SRI sukuk proceeds must be used exclusively for activities or transactions relating to eligible SRI projects. Refinancing means replacing existing financing; disclose the amount and eligible projects being refinanced. For a company acquisition, the acquired company must carry on only eligible SRI projects. Unlisted rules, 7.02 and 7.10–7.11, 7.16(b); retail rules, corresponding 21 provisions.
Prepare a spending schedule with your advisers: project, amount, purpose, payment date and evidence. If it includes existing financing, show the original eligible expenditure. Ask them to assess each proposed acquisition, related cost and fee rather than assuming your entire budget qualifies. The retail guidance to 21.10 gives examples of permitted transactions and supporting expenditure; check the treatment for your chosen route.
2. Set up project evaluation and selection
You must establish internal processes to evaluate and select eligible projects. The public disclosures must explain that process and the criteria for identifying and managing material environmental or social risks. Unlisted rules, 7.12 and 7.16(e)–(f); retail rules, 21.12 and 21.16(e)–(f).
In practice, give the process an owner. Keep a project assessment showing the criteria used, supporting evidence, risks, mitigation measures and approval. Agree how you'll escalate a delayed project or one whose design changes. These are practical preparation suggestions; the framework does not prescribe one committee or spreadsheet format for every issuer.
3. Manage and track the proceeds
Allocated proceeds must go into a designated account or be tracked in another appropriate way. A separate bank account is one option. Unlisted rule 7.13; retail rule 21.13.
Ask finance to design a register linking project allocations to invoices, payments and any refinancing records. Reconcile it to the accounting records and explain balances waiting to be spent. Have your advisers check temporary placements against the Shariah arrangements and issuance commitments. A project list alone won't show the movement of money.
4. Make disclosures and keep reporting
Issuer and framework information must be publicly accessible on a designated website from issuance throughout the sukuk's tenure—the period it remains outstanding. Required disclosures cover objectives, uses and refinancing, projects and intended impact, selection and risk criteria, proceeds management, and a statement of compliance with relevant environmental, social and governance standards or recognised best practices. Unlisted rules, 7.05 and 7.16; retail rules, 21.05 and 21.16.
Annual website reporting to sukuk holders must show original allocations, amounts used, unused amounts and their placement, and the projects with their impact or expected impact and underlying methods or assumptions. Where confidentiality or competitive considerations prevent comprehensive detail, the rules permit generic or aggregated portfolio information. Unlisted rules, 7.14–7.15; retail rules, 21.14–21.15.
Allocation explains where the money went. Impact explains the benefit expected or achieved. For example, keep installation spending separate from evidence of electricity generated. For a social service, distinguish planned capacity from people actually reached. Explain estimates, measurement periods and limitations. Don't assume annual reporting stops once all funds are allocated; establish the ongoing calendar with your advisers.
When is external review required?
An external review assesses specified sustainability features or framework compliance. Read its scope: a framework opinion and verification of later results answer different questions.
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| Applicable provisions | Position |
|---|---|
| Unlisted project-purpose SRI sukuk, Part 3 Chapter 7 | Rule 7.17 is conditional: if a reviewer is appointed, its report must be on the designated website. This provision does not itself require appointment. |
| Retail project-purpose SRI sukuk, Chapter 21 | Appointment and website publication are mandatory. Rule 21.18 also requires a summary and free-access link in the specified offer documents, with the document combination depending on issuer category. |
| ASEAN Green or Social standards, including combined Sustainability application | Reviewer appointment is recommended. If appointed, expertise, scope and disclosure provisions apply. Additional allocation and reporting checks are also recommended. |
| SRI-linked sukuk | Pre-issuance review and subsequent independent performance verification are required. |
Sources: SC unlisted rules, SC retail rules, ASEAN Green standards, 4.2–5, ASEAN Social standards, 4.2–5.
Investor expectations, certification and contractual promises may add review work. Agree its scope, timing and recurring cost before issuance. Your Shariah assessment also needs its own arrangements.
How does SRI-linked sukuk differ?
Project-purpose SRI sukuk centres on eligible use of the money. SRI-linked sukuk ties financial or structural terms to achievement of predefined sustainability targets; general-purpose proceeds may be permitted, subject to Shariah and the transaction terms. A key performance indicator (KPI) is the measure; a sustainability performance target (SPT) is the result and deadline. SC's linked-sukuk FAQ.
Linked sukuk has its own indicator, target, review and reporting provisions. Independent verification is required at least annually during the predefined target-assessment timeline until after the last target trigger event. A trigger event is the agreed event affecting the terms. Unlisted rules, Chapter 9; retail rules, Chapter 23.
Ask which approach matches your funding plan and evidence. Obtain the actual contractual consequences of meeting or missing targets; don't assume a particular discount or penalty.
What does an ASEAN label add?
The ASEAN Capital Markets Forum (ACMF) develops regional capital-market standards. For an ASEAN-labelled sukuk, the applicable SC chapters require adoption of its prescribed standards. A Malaysian SRI label does not automatically establish ASEAN compliance. SC's standards directory.
- ASEAN Green Bond Standards, revised October 2018: environmental purposes; excludes fossil-fuel power generation.
- ASEAN Social Bond Standards, October 2018: social purposes; excludes specified negative-impact activities relating to alcohol, gambling, tobacco and weaponry.
- ASEAN Sustainability Bond Standards, October 2018: combines eligible green and social projects and requires both standards, including exclusions.
- ASEAN Sustainability-Linked Bond Standards, October 2022: a separate performance-based standard with mandatory pre-issuance review and subsequent verification.
Although named bond standards, they apply to the relevant ASEAN sukuk labels through SC provisions. Green and social standards also specify ASEAN issuer/project and issuance connections, public access, proceeds controls and reporting. Have your advisers map every label you plan to use. The ASEAN taxonomy, which classifies activities, is a separate publication.