Malaysia’s Air Selangor has issued the world’s first Blue Sukuk, raising RM200 million to finance sustainable water infrastructure projects. The landmark issuance is also Malaysia’s first blue bond/sukuk and is expected to accelerate investment in water security, climate resilience and environmental sustainability across the region.

Key Overview

• Air Selangor raised RM200 million through the world’s first Blue Sukuk.
• The 15-year Islamic bond will finance sustainable water infrastructure projects.
• It is Malaysia’s first blue bond/sukuk issuance.
• The framework aligns with ICMA sustainability principles and IFC Blue Finance Guidelines.
• The issuance aims to promote greater investment in water security and climate resilience.

World’s First Blue Sukuk Supports Sustainable Water Investment

Pengurusan Air Selangor Sdn Bhd (Air Selangor) has successfully priced the world’s first Blue Sukuk, raising RM200 million to finance projects that strengthen water infrastructure and improve long-term water security in Malaysia.

The 15-year sukuk, issued under Air Selangor’s RM20 billion Islamic Medium-Term Notes Programme, represents a major milestone for sustainable finance as both the world’s first Blue Sukuk and Malaysia’s inaugural blue bond/sukuk issuance.

The transaction demonstrates how Islamic finance can support environmental sustainability by mobilizing capital for projects focused on protecting water resources and building climate-resilient infrastructure.

Expanding Blue Finance in Malaysia

Blue finance is an emerging area of sustainable finance that directs investment toward the protection, restoration and sustainable management of water resources, marine ecosystems and freshwater infrastructure.

Proceeds from the Blue Sukuk will support projects designed to improve long-term water security, strengthen climate resilience, reduce pollution and enhance environmental sustainability.

These investments contribute directly to United Nations Sustainable Development Goal 6, which focuses on ensuring access to clean water and sanitation while promoting sustainable water management.

Air Selangor said resilient water infrastructure requires long-term financing solutions capable of supporting growing demand while addressing climate-related challenges affecting water supply systems.

Framework Built on International Standards

The Blue Sukuk has been issued under Air Selangor’s revised Sustainable Development Sukuk Kelestarian Framework Version 2.0, which significantly expands the range of eligible sustainable financing categories.

The updated framework now supports financing for:

• Sustainable water and wastewater management.
• Water resource protection.
• Climate adaptation projects.
• Energy efficiency initiatives.
• Clean transportation.
• Social development projects.
• Green and sustainability initiatives.
• Blue finance projects.

The framework aligns with the International Capital Market Association (ICMA) Green Bond Principles 2025, Social Bond Principles 2025, and Sustainability Bond Guidelines 2021, while also incorporating the International Finance Corporation (IFC) Guidelines for Blue Finance Version 2.0.

Air Selangor also received a preliminary assessment from RAM Sustainability Sdn Bhd, confirming that eligible blue projects meet IFC Blue Finance requirements.

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CIMB Supports Landmark Issuance

CIMB Investment Bank Berhad acted as the Sole Sustainability Structuring Adviser and Sole Lead Manager for the transaction, helping Air Selangor enhance its sustainable financing framework.

The investment bank believes the issuance demonstrates the growing potential of innovative sustainable finance instruments to mobilize private capital for environmental infrastructure.

According to CIMB, the Blue Sukuk could encourage broader adoption of blue finance across Malaysia and Southeast Asia by providing investors with a credible framework for financing projects that protect water resources while delivering long-term environmental and social benefits.

The transaction also highlights the increasing role of Islamic finance in supporting sustainability objectives alongside traditional green and sustainability bonds.

Supporting Water Security and Climate Resilience

Water infrastructure is becoming an increasingly important investment priority as climate change places greater pressure on water availability, quality and distribution systems.

Investments financed through the Blue Sukuk are expected to improve the resilience of Malaysia’s water infrastructure while supporting more efficient water management and reducing environmental risks associated with pollution and water scarcity.

The issuance reflects growing recognition that sustainable financing mechanisms can play a critical role in addressing climate adaptation challenges and ensuring reliable water services for rapidly growing urban populations.

As governments and utilities seek innovative funding solutions, blue finance is emerging as a complementary market alongside green, social and sustainability bonds.

Outlook

The successful launch of the world’s first Blue Sukuk marks an important milestone in the evolution of sustainable finance and demonstrates the growing role of innovative financial instruments in addressing global water challenges. As climate change increases pressure on freshwater resources, investment in resilient water infrastructure is expected to become an increasingly important priority for governments, utilities and institutional investors. Air Selangor’s pioneering issuance could serve as a blueprint for other water utilities and infrastructure providers seeking to raise capital through blue finance while aligning with internationally recognized sustainability standards. If investor demand continues to grow, Blue Sukuk and other blue finance instruments could become a significant source of funding for projects that enhance water security, climate resilience and environmental protection across Asia and beyond.

FAQs

1. What is the Blue Sukuk issued by Air Selangor?

It is the world’s first Blue Sukuk, a 15-year Islamic bond that raised RM200 million to finance sustainable water infrastructure projects.

2. What is blue finance?

Blue finance is a form of sustainable finance that supports the protection, restoration and sustainable management of water resources and water-related ecosystems.

3. How will the funds be used?

The proceeds will finance projects focused on sustainable water and wastewater management, water security, climate resilience and environmental protection.

4. Why is this issuance significant?

It is both the world’s first Blue Sukuk and Malaysia’s first blue bond/sukuk, setting a new benchmark for combining Islamic finance with sustainable investment in water infrastructure.

Sources: The Edge Malaysia, The Star, New Straits Times, Business Today

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