View of PSEUDO-ENVIRONMENTAL VALUES VERSUS ETHICAL SPIRITUALITY: A STUDY ON INDONESIAN GREEN SUKUK

Volume 8, Number 2, 2023

P-ISSN: 2502-8006 E-ISSN: 2549-8274

DOI: https://doi.org/10.22373/petita.v8i2.225 Indexed by Scopus:

https://suggestor.step.scopus.com/progressTracker/?trackingID=6104E7D47B535213

PSEUDO-ENVIRONMENTAL VALUES VERSUS ETHICAL SPIRITUALITY: A STUDY ON INDONESIAN GREEN SUKUK

MUHAMMAD SYAUQI BIN-ARMIA

Universitas Islam Negeri Ar-Raniry, Banda Aceh, Indonesia Email: msyauqibinarmia@ar-raniry.ac.id

ARDELIA VIDYA RIANA

Birmingham City University, Birmingham, United Kingdom Email: ardelia.riana@mail.bcu.ac.uk

Abstract: This paper investigates and inspects the application of green sukuk as an Islamic environmentally accepted bond and its impacts on the global market. Law No.19 of 2008 on Shariah Government Securities, governs the exercise of green sukuk that accepts two basic norms, Shariah compliance and ecosystem friendly. Philosophically speaking, environmental preservations are embedded in Shariah as a core principle. Shariah persuaded unharmed human beings as well as other creatures. The amalgamation between the sharia principle and environmental values out to be sufficient to manifest the objective.

The research aims to examine the worthiness of new emerging sukuk while carrying the same basic principle on moral, ethical and environmental embeddedness within the sukuk itself. The research methodology conducted in this research will implement mixed- methods through qualitative and quantitative approaches. The research indicates that green sukuk issuance has no contribution toward global sukuk performances signaled by selected sukuk indices on the issuance date. In addition, there are no sufficient assessment mechanism indicators to ensure the application of environmental distinctive values and shariah compliance implimentations.

Keywords: green sukuk, environment, value clashes, capital market.

Abstract: Tulisan ini menyelidiki penerapan green sukuk sebagai obligasi Islam yang ramah lingkungan dan dampaknya terhadap pasar global. Undang-Undang Nomor 19 Tahun 2008 tentang Surat Berharga Syariah Negara (SBSN) mengatur pelaksanaan green sukuk yang menganut dua norma dasar, yaitu kepatuhan syariah dan ramah ekosistem.

Secara filosofis, pelestarian lingkungan hidup tertanam dalam syariah sebagai prinsip inti. Syariah mengatur prinsip untuk tidak merugikan manusia dan juga makhluk lainnya. Penggabungan antara prinsip syariah dan nilai-nilai lingkungan sudah cukup untuk mewujudkan tujuan tersebut. Penelitian ini bertujuan untuk menguji kelayakan jenis sukuk yang baru ini dengan tetap mengusung prinsip dasar yang sama mengenai keterikatan moral, etika, dan lingkungan dalam sukuk itu sendiri. Metodologi penelitian yang dilakukan dalam penelitian ini akan menerapkan mix-methods melalui pendekatan kualitatif dan kuantitatif. Hasil penelitian menunjukkan penerbitan green sukuk tidak memberikan kontribusi terhadap kinerja sukuk global yang ditunjukkan oleh indeks

sukuk pada tanggal penerbitan. Selain itu, tidak ada indikator mekanisme penilaian yang memadai untuk memastikan penerapan nilai-nilai keistimewaan lingkungan dan kesuksekan dampak syariah pada sukuk tersebut.

Kata kunci: Sukuk hijau, Lingkungan, Benturan nilai, Pasar modal.

INTRODUCTION

Green sukuk are Shariah-compliant investments in energy generated by renewable sources and natural resources. Sukuk revenues will be used to protect the environment and our natural resources, and they will also be used to preserve energy, encourage clean energy sources, and contribute to lowering greenhouse gas emissions.¹ Green sukuk is a novel instrument in Islamic finance that requires investors’ trust. This makes it difficult to guarantee investors the potential for green sukuk to have a positive social impact on the environment while also benefiting the country’s economy. As a result, the market must provide transparent and reliable information to boost the participation of issuers and investors in the green sukuk market.²

Indonesia issued sovereign sukuk worth $ 1.3 billion totaling 79 kinds of sukuk (OJK 2018).

Moreover, on the 23^rd of June 2018, the Indonesian authority issued the Green Sukuk.³ This five-year sukuk aimed to raise US$ 1.25 billion and carried a coupon of 3.75 %. This became the first sovereign green sukuk issuance in Asia which has been traded internationally. This sukuk is based on wakalah and will be used in renewable energy under the supervision of the Centre for International Climate and Environmental Research (CICERO) to assess the green framework industry.⁴ This innovation was one of the government efforts where President Widodo aimed to reduce the emissions by at least 29% by 2030 (The Strait Times 2018). Through this green sukuk issuance, the government aimed to stimulate the Islamic financial industry.

Green sukuk is particularly essential in Indonesia since it is considered one of the nations with a high degree of sensitivity to catastrophes. The natural catastrophes that happen frequently in Indonesia are hydrometeorological, the prevalence of which is increasing due to global warming due to unsustainable growth.⁵

As green sukuk is still in its early stages, this article is more conceptual in nature to explain market reactions to Indonesian green sukuk issuance. Therefore, this study intends to assess Cumulative Abnormal Returns (CAR) of chosen global sukuk indices and to evaluate the shariah compliance and environmental objectives of the projects that have been performed. Furthermore, the purpose of this research is to detect potential norm clashes in the Indonesian green sukuk application. Because green sukuk products are new to the Islamic capital market, the study used quantitative and qualitative research with secondary data references.

LITERATURE REVIEW

Sukuk are Sharia-compliant bonds that have been backed by specified pools of assets.

1 Abdullah, Norhayati and Masri Azrul Nayan, ‘Green Sukuk: Financing the Future to Sustainable Environment’ 2672.

2 Yulia Anggraini, ‘PERAN GREEN SUKUK DALAM MEMPERKOKOH POSISI INDONESIA DI PASAR KEUANGAN SYARIAH GLOBAL’ (2018) 1 El-Barka: Journal of Islamic Economics and Business 251

<http://jurnal.iainponorogo.ac.id/index.php/elbarka/article/view/1453>.

3 The Strait Times, ‘Indonesia Raises $1.65bln in First Asian Sovereign Green Bond Sale, SE Asia News

&amp; Top Stories - The Straits Times’’ (The Strait Times, 2018) <https://www.straitstimes.com/

asia/se-asia/indonesia-raises-165bln-in-first-asian-sovereign-green-bond-sale.>.

4 Bernardo Vizcaino, ‘Green, Islamic Investors Find Common Ground with Indonesian Sukuk’ (Reuters, 2018) <https://www.reuters.com/article/indonesia-sukuk-esg-idUSL8N1QK0SE>.

5 Abdullah, Norhayati and Nayan (n 1).

Sukuk is a financial obligation-evidencing mechanism. A sukuk is a percentage benefit portion of ownership in an underlying pool of assets, or ‘usufruct’. Sukuk income often has a connection to the income and cash flow provided by the assets purchased or created using sukuk financing. In compliance with Sharia rules, the majority of sukuk issued to date have been asset-backed (e.g., infrastructural projects), with the originator’s credit being a deciding element in grading and investor analysis.⁶

Investors who purchase sukuk and become sukuk subscribers receive a certificate from the issuer as proof that they own the asset and are able to receive regular profit distributions on the principal capital invested. The principal capital invested will be returned to the Sukuk subscribers upon maturity date (usually a period of three years period in Indonesian sukuk). As with other Islamic financial instruments, there are various ways to achieve the same goal.⁷

In the context of a green sukuk, it is a unique type of sukuk. It addresses the funding of investments that will benefit the environment. Green sukuk has the ability to attract both green investors and Shariah-compliant obligations, which is an advantage. Green sukuk are released to raise awareness of the need for climate and the preservation of the environment. Green sukuk is an environmentally friendly alternative to investing that is still relatively unknown among investors.⁸

In addition to adhering to Sharia guidelines, the issuing of green sukuk must adhere to sustainable finance principles. The Indonesian Financial Services Authority (OJK) released the Regulation on Sustainable Finance in July 2017 as a follow-up to the Roadmap for Sustainable Finance, which was introduced in December 2014. The POJK stresses the importance of creating a balance between social, economic, and environmental elements as a means to achieve sustainable, stable, and equitable growth.⁹

Throughout management, Indonesia has established Nawacita (or nine agenda priorities) as the primary objectives under the national development strategy goals. This involves encouraging carbon and climate-resilient development paths to become an intrinsic element of these objectives and integrated into development plans. The majority of the programs being implemented by the Indonesian government to deal with climate change mitigation and adaptation will also provide significant social benefits.¹⁰

6 ibid.

7 Pradina Anugrahaeni, ‘Analysis of Indonesian Sovereign Green Bond and Green Sukuk Initiatives’

(2017) 1 Kajian Ekonomi dan Keuangan 1 <https://fiskal.kemenkeu.go.id/ejournal/index.php/kek/

article/view/266>.

8 Donato Morea and Luigi Antonio Poggi, ‘An Innovative Model for the Sustainability of Investments in the Wind Energy Sector: The Use of Green Sukuk in an Italian Case Study’ (2017) 7 International Journal of Energy Economics and Policy 53.

9 Lastuti Abubakar and Tri Handayani, ‘Green Sukuk: Sustainable Financing Instruments for Infrastructure Development in Indonesia’, Proceedings of the 1st Borobudur International Symposium on Humanities, Economics and Social Sciences (BIS-HESS 2019) (Atlantis Press 2020) <https://www.

atlantis-press.com/article/125939591>.

10 Risanti and others, ‘Peran Green Sukuk Dalam Mewujudkan Pembangunan Yang Berkelanjutan’, Prosiding Konferensi Nasional Ekonomi Manajemen Dan Akuntansi (KNEMA) (2021). See also Chairul Fahmi and Muhammad Siddiq Armia, ‘Protecting Indigenous Collective Land Property in Indonesia under International Human Rights Norms’ (2022) 6 Journal of Southeast Asian Human Rights 1

<https://jurnal.unej.ac.id/index.php/JSEAHR/article/view/30242>; Muhammad Siddiq Armia,

‘Ultra Petita and the Threat to Constitutional Justice: The Indonesian Experience’ [2018] Intellectual Discourse; Muhammad Siddiq et all Armia, ‘Post Amendment of Judicial Review in Indonesia: Has Judicial Power Distributed Fairly?’ (2022) 7 JILS 525.territories, and natural resources to non- ratification countries of the Convention on indigenous peoples’ rights, especially to the Indonesian context. In the last few decades, the United Nations has developed and recognized the rights of indigenous peoples, including rights to their ancestral lands, territories, and resources. These rights

METHODS

The research concentrates on green sukuk issuance and the relationship with selected Islamic banks, in addition to the multiple norms contained in the execution of Law No.19 of 2008 on State Islamic Securities (Surat Berharga Syariah Negara – SBSN) in legal analysis, as well as the investigation of potential disharmony across sectors. The methodology used a combination of qualitative and quantitative methods.

In performing legal analysis, the qualitative methodology of this research adopts the black- letter law approach.¹¹ The meaning of black-letter law refers to a standard aspect that has become undeniably ordinary knowledge and is universally accepted. So, for instance, when a contract is drawn up, the core article or technical procedures should be specified.

This research is supplemented with a discussion of legal texts by the authors. As a result, black-letter law is frequently employed as a study subject, illustrating that such law is an acknowledged consensus and undeniably true.

The quantitative aspect of this research examines the hypotheses using event study analysis and two-tailed assessments. The efficacy of the indices will be depicted by Abnormal Return (AR). The following returns were used in this study:

Cumulative Abnormal Return (CAR) will be calculated using the following formula:

Where:

𝐶𝐶𝐶𝐶𝐶𝐶_{(𝑇𝑇1,𝑇𝑇2)} = ∑^𝑇𝑇2 𝐶𝐶𝐶𝐶_{𝑖𝑖𝑖𝑖}

𝑖𝑖=𝑇𝑇1

CAR_(T1,T2) = Cumulative abnormal return on price of index I in event period. T1 the first and T2 is the last day of event period

This investigation’s event is the green sukuk issuance date was 25^th June 2018. The investigation groups for this research: are group one (pre-event), group two (the event), and group three (post-event). To calculate the expected return, the estimation window will be set from 10 days to 99 days before the implementation date. The alternative hypotheses of the discussions are as followed;

Alternative hypothesis:

H_1:β_1≠0 the law has effect on cumulative abnormal return before implementation date H_1:β_2≠0 the law has effect on cumulative abnormal return on implementation date H_1:β_3≠0 the law has effect on cumulative abnormal return after implementation date The author used a two-tailed test to evaluate the hypothesis (t-statistic and t-table) as follow:

t_CAR= CAAR_it/(σ(CAR_it)/√N)

have been stipulated in several instruments, such as the ILO Conventions No.169 and UNDRIP.

Nevertheless, most Asian and African countries have not ratified the Treaty, including Indonesia.

Consequently, the rights failed to be adopted into national policies, which the ratification is a pre- condition before came into force through the national regulations. Indonesia also doubted the exclusive rights of land, territories, and resources traditionally owned by indigenous peoples. Legally, lands, territories, and resources are controlled by the States, as mentioned in Article 33 of the 1945 Constitutional law. Economically, Indonesia relies on land, territories, and natural resources to boost its national revenues. To achieve this aim, the expropriation of indigenous land and territories often occurs through land concession policy for private or state-owned companies. As a result, land tenure and social conflict were common phenomena from the New Order Regime until the current day. This conflict spreads across the country from the west part (Sumatra

11 David Glichrist and Kylie Coulson, Pragmatism, Black Letter Law and Australian Public Accounts Committees (2015).

t_CAR= t-statistic for the CAR CAAR_it = CAAR at time i

σ = Standard deviation of CAR at time t N= total no. of observations

The 64 degrees of freedom should be applied to gain significant level. (df=n-1, where n=100).

Data collection will be recapitulated from the quote history of selected selected indices.

The authors determined the United States Dollar (USD) as the used currency. The applied methodologies used to answer the following research question: (1) does the green sukuk issuance impact the sukuk global market? (2) If so, to what level does this affect the market? (3) and how to guarantee the basic principle of Shariah compliance will be delivered throughout the Islamic capital market based on Law No.19 of 2008 on Shariah Government Securities?

RESULT/FINDING

Quantitative Discourse on Significancy of Indonesian Green Sukuk in Global Market The Indonesian government seized the opportunity to take part in sovereign sustainable financing equity. Since its first appearence, the government able to gather more than 1 billion USD in 2018.¹² This enormously grabbeb the global eco-friendly sovereign bond market with carried Islamic norms. Indeed, this five-year sukuk is planned as a financial instrument to capture global investors as well as to boost Islamic financial sectors.

This part of the research pointed to the quantitative result of the aforementioned aims of Indonesian green sukuk issuance. The study will embark on the influence of issuance date (25^th June 2018) on the selected indices. The abnormal returns of indices will be subject to discussion. The samples will be from five different indices, namely: a. Dow Jones Sukuk Index (DJSUKUK), Dow Jones Sukuk Index Total Return (DJSUKTXR), Jakarta SE Islamic Index (JKII), S&P Global ESG Equity & Green Bond Balanced Index-USD (SPGESBUT) and Sukuk & Bonds Index (TSBI).

The chosen indices were chosen as the representatives of each region’s equity market.

TSBI is a Saudi Arabian index that covers the Gulf Corporation Countries (GCC) region, DJSUKUK Index represents the global sukuk based in the United States, DJSUKTXR represents the total return index which is mainly based in the United States, SPGESBUT brought in as the representative of European region, and JKII included to picture local equity market reactions to the issuance.

The discussion will embark on the abnormal returns resulting from the calculation throughout the selected indices. The closed figures of indices were deployed to calculate actual and expected returns. For that reason, the author determined an estimation window of 10 days to 100 days before the issuance date. The operated index reference will be the Jakarta Composite Index (IHSG). Accordingly, the event will be as shown:

1. Group 1 called “Pre-event” (from -3 to -1, a day before the issuance date) 2. Group 2 called “event” (from day one to +1, a day after issuance date) 3. Group 3 called “Post-event” (from +2 to +3, post the issuance date)

The two-tailed, t-statistic and t-table test, hypothesis test methods are being deployed.

Meanwhile, the observation time series was between 1^st February 2018 to 7^th September 2018. The historical background of this selection period was the government’s ambition

12 The Strait Times (n 3).

and strategy revelation to diminish the emission level and cut the carbon footprint.¹³ The Analysis of the Abnormal Return

DJSUKUK

The Dow Jones Sukuk Index part unveiled three parts of the calculation; expected return, actual return, and abnormal return. As pointed out, those returns developed on three groups of events; pre-event, event, and post-event. Technically, the way to calculate the abnormal return is through the completed actual and expected return calculation.

Whereas, the expected returns are computed by applying the market model approach.

Consequently, these were the results of the abnormal return of DJSUKUK;

Figure 1 above displays the abnormal return movement of the DJSUKUK index.

Throughout the focused

events, DJSUKUK demonstrated the series of influences of upward movement post the issuance date, even though it was an insignificant result.

Whereas, the pre- event witnessed the fluctuative movement with a good prospective. This justified, the Indonesian green sukuk issuance, as captured by the DJSUKUK index, unable to significantly the global Islamic equity index, particularly within the United States market.

DJSUKTXR

The Dow Jones Sukuk Index Total Return (DJSUKTXR) is the equity index to measure sukuk total return. This index was developed by Standard & Poor’s Corp in the United States as the country of issuer. As above-mentioned, three distinctive levels of return will be

applied for the calculation.

As above-mentioned, three distinctive levels of return will be applied to the calculations. By using the same approach, here the result of its abnormal return:

Figure 2 pictured movements of DJSUKTXR abnormal return. Pre- event (-3 to -1), event (0 to +1) and post-event (+2 to +3) displayed a series of attractive movements.

13 Ibid.

Figure 1 DJSUKUK Abnormal Returns

-0.0200000 -0.0150000 -0.0100000 -0.0050000 0.0000000 0.0050000 0.0100000

3 2 1 0 -1 -2 -3

DJSUKUK ABNORMAL RETURNS

Figure 2 DJSUKTXR Abnormal Returns

-0.080000 -0.060000 -0.040000 -0.020000 0.000000 0.020000 0.040000 0.060000 0.080000

3 2 1 0 -1 -2 -3

DJSUKTXR ABNORMAL RETURNS

With a slight difference to the DJSUKUK index, DJSUKTXR was able to show the constant rising movement from -0.04853 to 0.01227 on the post-event. This was a good justification that Indonesians, although still unable to significantly influence the market, gave the prospective total return for the industry.

SPGESBUT

The S&P Global ESG Equity & Green Bond Index (USD) TR is the Islamic equity index issued by Standard & Poor’s Corp in the United States. It is a balanced index to calculate the performance measurement of a 50/50 stock-bond allocation. Following the previous technical approach, the abnormal returns of the index are calculated after defining the actual and expected returns. Hence, the results as follow:

Figure 3 SPGESBUT Abnormal Returns

-0.020000

-0.015000 -0.010000 -0.005000 0.000000 0.005000 0.010000 0.015000 0.020000

3 2 1 0 -1 -2 -3

SPGESBUT ABNORMAL RETURNS

Figure 3 above revealed SPGESBUT’s abnormal returns maneuver during three events. It showed the Indonesian green sukuk issuance offered a significant impact on the ESG and Green Bond equity market globally.

However, the event justified a different impact.

Where there were significant downtrends in the event and post-event periods. This also justified the Indonesian green sukuk’s unable to significantly influence the green bond equity market.

TSBISukuk and Bond Index (also known as Tadawul Sukuk and Bond Index) is the equity market index issued by the Saudi Arabian authority. Alongside the mentioned indices, TSBI will include all three returns as well; actual, expected, and abnormal return. Throughout the same process of previous indices, the result is as follow:

Figure 4 TSBI Abnormal Returns

-0.040000 -0.020000 0.000000 0.020000 0.040000 0.060000 0.080000 0.100000

3 2 1 0 -1 -2 -3

TSBI ABNORMAL RETURNS

Figure 4 featured TSBI’s

abnormal returns fluctuation of pre-event,

event, and post-event periods. It justified the Indonesian green sukuk issuance had a prompt significant impact on the Saudi equity market. The figures rose dramatically during the event period while they went down in the post-event period.

Also, this justified green

sukuk successfully

attracted GCC countries’ investors.

JKIIJakarta SE Islamic Index (JKII) abnormal return has been chosen to provide the movement picture of the local equity market on the Sharia compliance stock exchange. This is to justify the issuance of green sukuk either benefit the local shares or provide no significant impact. Throughout certain methodologies, the results as follow:

Figure 5 JKII Abnormal Returns

-0.03

-0.02 -0.01 0 0.01 0.02 0.03 0.04 0.05

3 2 1 0 -1 -2 -3

JKII ABNORMAL RETURNS

Figure 5 revealed the JKII performance on abnormal returns. The event period of the event witnessed a significant downtrend of the returns. While the

post-event period demonstrated a steady rise

in the abnormal return.

This was due to the uncertain regional policy toward the internal Islamic equity market. Also, this had been elucidated by the majority of nature of business from JKII were unable to meet the environment-friendly enterprises.

The subsequent steps of this research discussed the calculation to deny the null hypothesis.

Accordingly, the two-tailed test (t-table and t-statistic) as the means to examine the hypothesis, will be applied with the following criteria:

Criteria Decision

-t-table ≤ t-stats ≤ t-table cannot reject H0

t-stats < -t-table reject H0

t-stats > t-table reject H0

The latter will elucidate the t-table. This was adopted the probability rate of 1%, 5%, and 10% of significant level. Hence, the computation is as follow:

T-table

n = 5

df (n-1) = 4

critical value (10% significant level) = 2.131846786 (Two-tailed test) critical value (5% Significant level) = 2.776445105 (Two-tailed test) critical value (1% significant level) = 4.604094871 (Two-tailed test)

The following step is the counting of Cumulative Average Abnormal Return (CAAR) by adopting the t-statistic. The computation result as follows:

Post-event (+2,+3) Event (0,+1) Pre-event (-3,-1)

T-Statistic 0.156278402 0.335385353 0.801259058

CAAR 0.00161 0.00739 0.01141

The hypothesis of the research at this time can be tested, by using particular criteria that have been explained before. Hence, rejection or acceptance of the null hypothesis analysis will be explained as follows: AnalysisEvent Windowt-statst-tablecomparison Hypothesis Decision If α = 10% (-3,-1) Pre-event0.8012590582.131846786t-stats < t-tablecannot reject H0The event not related to abnormal return (0,+1) event0.3353853532.131846786t-stats < t-tablecannot reject H0The event not related to abnormal return (+2,+3) post-event0.1562784022.131846786t-stats < t-tablecannot reject H0The event not related to abnormal return If α = 5% (-3,-1) Pre-event0.8012590582.776445105t-stats < t-tablecannot reject H0The event not related to abnormal return (0,+1) event0.3353853532.776445105t-stats < t-tablecannot reject H0The event not related to abnormal return (+2,+3) post-event0.1562784022.776445105t-stats < t-tablecannot reject H0The event not related to abnormal return If α = 1% (-3,-1) Pre-event0.8012590584.604094871t-stats < t-tablecannot reject H0The event not related to abnormal return (0,+1) event0.3353853534.604094871t-stats < t-tablecannot reject H0The event not related to abnormal return (+2,+3) post-event0.1562784024.604094871t-stats < t-tablecannot reject H0The event not related to abnormal return The aforementioned table describes the abnormal return of the selected indices correlation towards the green sukuk issuance events on three distinctive levels; pre-event, event, and post-event. In addition, to explore significant levels of the event, the following will display the relationship between the Average Abnormal Return (AAR) test from the 10% significance level. Eventt-stats of AARt-table If α = 10% ComparisonDescription -30.00306122.131846786t-stats< t-tablenot significant -2-0.00145432.131846786t-stats< t-tablenot significant -10.00712112.131846786t-stats< t-tablenot significant 00.00026962.131846786t-stats< t-tablenot significant 10.01988322.131846786t-stats< t-tablenot significant 2-0.00512912.131846786t-stats< t-tablenot significant 3-0.00334752.131846786t-stats< t-tablenot significant

From following analysis, demonstrated that all critical levels of the hypothesis tests of the selected indices were unable to show a significant impact on the Indonesia green sukuk issuance. This indicated that the global Islamic equity index still considers the Indonesian market insignificant compared to the GCC region or the Middle East and North Africa (MENA) market. In addition, Indonesian green sukuk is unable to convince the social environmental market to engage and contribute to cross-border green equity initiatives. Thus, the government needs to recontextualise the form of equity to raise the attractiveness.

Figure 6 The Average Abnormal Return of Selected Indices

0.30612%

-0.14543%

0.71211%

0.02696%

1.98832%

-0.51291%-0.33475%

-1.00000%

-0.50000%

0.00000%

0.50000%

1.00000%

1.50000%

2.00000%

2.50000%

3 2 1 0 -1 -2 -3

EVENT PERIOD FROM -3 TO +3 EVENT

Average Abnormal Return in % (AAR)

Figure 6 above shows the movement of the AAR trend from all selected indices. It displayed the indices had momentum in the pre-event period with a significance rise to 1.9883%

from -0.513%. But it suddenly descended lucratively on the event and post-event to -0.1454% at his lowest point.

Qualitative Discourse on Significancy of Indonesian Green Sukuk in Global Market 1. How Promosing Green Sukuk is?

The objective of law No.19 of 2008 on State Islamic Securities (Surat Berharga Syariah Negara – SBSN), considered the social welfare improvement and the utilising of Sharia compliance means to be added into the national budgeting plan and revenue enhancement.

This law is utilised as the legal standing for both regular sukuk and green sukuk. The main function of the State Islamic Securities is to become an effective tool to fund the state- owned project development, as stated in article no. 4. Unfortunately, law No.19 of 2008 did not mention the full social and environmental impact initiative for the green sukuk issuance. Furthermore, the government yet to comply with the green initiative until the ratification of the Paris Agreement in 2016¹⁴ and issued the Green Bond and Green Sukuk Framework.¹⁵

The green sukuk aims to elevate the Islamic equity market in Indonesia to suit the climate- change reduction and low-carbon industry. The method of green sukuk at the first stage

14 Davira Syifa Rifdah Suwatno, ‘Ratifikasi Terhadap Traktat Persetujuan Paris (Paris Agreement) Sebagai Wujud Implementasi Komitmen Indonesia Dalam Upaya Mitigasi Dan Adaptasi Perubahan Iklim’ (2022) 10 Jurnal Pendidikan Kewarganegaraan Undiksha 328.

15 Abubakar and Handayani (n 9).

is designed for limited subscribers. Around ten sukuk series of retailed green sukuk have been issued between 2016 and 2023.¹⁶ The green sukuk carried by the government is based on the Indonesia Green Bond and Green Sukuk framework.¹⁷ The following table explains classification of the green sukuk framework:

Table 1 Green Bond and Green Sukuk Classification Energy Sectors

No Type Focus Area

1. Renewable Energy Energy transmission and Technology

Development

2. Energy Efficiency Reduced 10% energy consumption 3. Waste to Energy / Waste

Management Landfil management and waste renewable energy transformation

Natural Resource and Agriculture Sectors

No Type Focus Area

4. Sustainable Natural Resource Natural resources and biodiversity management

5. Sustainable Agriculture Agriculture insurance and sustainable method development

Industry, Transportation and Climate Change Reduction Sector

No Type Focus Area

6. Green Tourism Infrastructur Support and Green Tourism Principles Development

7. Green Building Implementation of the Objective of Green Building Council Indonesia

8. Sustainable Transport Development of Clean Transportation and Network System

9. Resilience to Climate for Disaster

Risk Area Research and Development of Mitigation Plan towards the Disaster Risk Area

The bottom line of the framework is to reduce carbon emissions and promote a new initiative for sustainable industry. This covers the diminishment of fossil fuel-based power plants and transportation, high carbon building and industry, imposing a carbon tax, and initiating the carbon trading exchange. Additionally, the green sukuk instrument might be used as a provisional government budget scheme independently. This commitment requires not only the environmental values rationale but also the spiritual approach persuasion to encourage the investors. For that reason, the spiritual-based sukuk promises the subscribers’ attention who pursue multiple values offered by certain equity market instrument.

Sukuk or green sukuk exclusively designed to diversify sources of government budget.

16 Nurhayati Gustina, ‘PERFORMA SUKUK RITEL: SEBELUM DAN SAAT TERJADI PANDEMI COVID-19’

(2021) 10 JURNAL AKUNTANSI 369 <http://ejournal.stiemj.ac.id/index.php/akuntansi/article/

view/415>.

17 Abubakar and Handayani (n 9).

Abubakar & Handayani argued there are at least four indicators to maintain the purpose of green sukuk; (1) Utilised in 100% green project financing or refinancing, (2) the Ministry of Finance and National Development Planning Agency hold the review and approval responsibility, (3) the green project guarantee from the parties utilised the green sukuk, (4) green project reports on how far this instrument contributes in carbon reduction.¹⁸ Additionally, green sukuk contributed to critical green and zero carbon purposes with the projects’ valuation up to IDR 16.75 trillion, with the projection of USD 339.38 million will be raised in 2029.¹⁹

2. Spiritual Driven or Pseudo Environmental Values?

Having an instrument undertake multiple bases of values is challenging. Green sukuk combined the comprehensive Shariah compliance principle alongside the environmental drives.²⁰ Main sharia principles must contain within the Islamic financial instrument at least three main point; (1) the objectives of sharia, (2) legal maxims in the contract, (3) fatwa and jurisprudential application.

2.1 The Objectives of Sharia

Besides having the counterpart of the conventional instrument, implementation of the objective of shariah is one of the main purposes in the Islamic financial framework. Muslim scholars have generally considered rahmah (mercy) to be the all-persasive objective of the shariah. Hence, the primary objective of Shariah is to promote human well-being from the perspective of the Islamic worldview.²¹ This incorporates the aim: to educate (tarbiyah), to construct justice (adl), and to protect the public interest (maslahah ammah). To pursue the objectives, it complied with the fulfillment of the basic interests, namely; necessities (daruriyyat), the needs (hajiyyat), and the embellishments (tahsiniyyat). Where the embellishments are subordinate to the needs and the needs are subordinates to pressing necessities.²²

The aforementioned three descending cate gories are commonly known as basic interest.

The necessity (daruriyyat) is the ultimate demand to guarantee the life of human being physically and spiritually and to anticipate the chaos of the normal order in society.

Well-known as public interest (maslahah ‘ammah), they are listed as five: preserving the religion (ad-din), the life (an-nafs), the intellect (al-‘aql), the offspring (al-nasl) and the property (al-mal). Subsequently, the need (hajiyyat) is identified as the fulfillment of the interest after removing the threat of survival and normal order. It seeks to remove severity and hardship while maintaining necessities. Ultimately, the embellishment (tahsiniyat) is

18 ibid.

19 Ramdansyah Fitrah and Andri Soemitra, ‘Green Sukuk For Sustainable Development Goals in Indonesia: A Literature Study’ (2022) 8 Jurnal Ilmiah Ekonomi Islam 231 <https://jurnal.stie-aas.

ac.id/index.php/jei/article/view/4591>.especially for renewable energy projects. This problem then encourages stakeholders to create financial instruments that focus on funding projects that are following the Sustainable Development Goals (SDGs

20 Khairunnisa Musari and Sutan Emir Hidayat, ‘The Role of Green Sukuk in Maqasid Al-Shariah and SDGs: Evidence from Indonesia’ in Zul Hakim Jumat, Saqib Hafiz Khateeb and Syed Nazim Ali (eds), In Islamic Finance, FinTech, and the Road to Sustainability: Reframing the Approach in the Post-Pandemic Era (Springer International Publishing 2023).

21 Muhammad Siddiq Armia, ‘Public Caning: Should It Be Maintained or Eliminated? (A Reflection of Implementation Sharia Law in Indonesia)’ [2019] Qudus International Journal of Islamic Studies;

Muhammad Siddiq Armia and others, ‘Criticizing the Verdict of 18/JN/2016/MS.MBO of Mahkamah Syar’iyah Meulaboh Aceh on Sexual Abuse against Children from the Perspective of Restorative Justice’

(2022) 17 AL-IHKAM: Jurnal Hukum & Pranata Sosial 113 <http://ejournal.iainmadura.ac.id/index.

php/alihkam/article/view/4987>.

22 Akbar, Muhammad and Sandy Rizki Febriadi, Tinjauan Konsep Dharuriyyat, Hajiyyat Dan Tahsiniyyat Terhadap Pelaksanaan Pembiayaan Di BTN Syariah Kantor Cabang Kota Bandung (Unisba Repository 2018).

detailed as realisation of perfection and advancement of the quality of life in the customs and conduct of all the people at all levels.²³

2.2 Legal Maxims in the contract

The nature of Shariah within the Islamic financial instrument has to be adopted to ensure the application of the Sharia objective. This nature comprehended from demystifications of Shariah which are listed as aqidah (faith), akhlaq (morality and ethics), and mu’amalah (practices/interaction) between man and God (habluminallah), and among the human being (hablumminannas).

To preserve the nature of Shariah utilised the general rules of Islamic jurisprudence (fiqh), commonly known as legal maxims. At least, there are five main legal maxims;²⁴ 1. “matters are determined according to intentions”, 2. “certainty is not overruled by doubt”, 3. “hardship begets facility”, 4. “harm must be eliminated”, 5. “custom is a basis for judgment”. This legal maxim provides guidance to undertake legal opinion in certain matters. It’s a theory based on Islamic jurisprudence that demonstrates the rules to be deployed on various issues.

Within the scope of the Islamic equity market, the nature of shariah is the main principle to consider Islamic values through the implementation of legal maxims. The role of the legal maxim is to assess the Sharia compliance application associated with business activities and framework. For instance, the legal maxim “reward begets risk” is a branch from the main legal maxim “hardship begets facility”. It indicates that profit might not be expected with the risk-free or zero-loss undertaking. In ijarah nominate a contract, where the property owner might experience two major risks; 1. Market risk, where the value of the property plummeted could plummet causing capital depreciation, 2. Operational risk, where the property’s maintenance cost exceeds the rental income.²⁵ Green sukuk, where the main used contract is ijarah, did not how this matter might be anticipated.

Thus, the subscribers earn the ujrah (rental) without being informed regardless of the subject matter (green project) contributed to fulfilling the environmental requirements or realising particular shariah objectives.

2.3 Fatwa and Jurisprudential Application.

The Shariah principle applied in sukuk is also utilised in green sukuk. The National Sharia Council (Dewan Syariah Nasional – DSN) of the Indonesian Council of Ulama (MUI) clearly states that sukuk must avoid speculation, gambling (qimar), major uncertainty (gharar fahish), ambiguity (jahalah), corruption, having disregard advantages, and the financial return allocation outside the real activity of the sukuk. In addition, the avoidance of usury or interest in applying the sukuk concept to the equity market.²⁶

Characteristically speaking, there is more than one fatwas (legal opinion) governing the

23 Murdan, ‘Hukum Islam Dalam Kerangka Sistem Hukum Masyarakat Modern’ (2016) 1 PETITA:

Jurnal Kajian Ilmu Hukum dan Syari’ah; Mohd. Hisyam Mohd. Kamal, ‘Human Rights Perspectives On Issues In The Implementation Of Islamic Criminal Law In Malaysia’ (2019) Volume 4 Petita : Jurnal Kajian Ilmu Hukum dan Syariah; Ratno Lukito, ‘Shariah And The Politics Of Pluralism In Indonesia:

Understanding State’s Rational Approach To Adat And Islamic Law’ (2019) Volume 4 Petita : Jurnal Kajian Ilmu Hukum dan Syariah.

24 Ahmad Monir Abdullah, Buerhan Saiti and Mansur Masih, ‘The Impact of Crude Oil Price on Islamic Stock Indices of South East Asian Countries: Evidence from MGARCH-DCC and Wavelet Approaches’ (2016) 16 Borsa Istanbul Review 219 <https://linkinghub.elsevier.com/retrieve/pii/

S2214845015300338>.

25 ibid.

26 Essia Ries Ahmed, Aminul Islam and Azlan Bin Amran, ‘Examining the Legitimacy of Sukuk Structure via Shariah Pronouncements’ (2019) 10 Journal of Islamic Marketing 1151 <https://www.emerald.

com/insight/content/doi/10.1108/JIMA-03-2018-0050/full/html>.

sukuk instrument.²⁷ From the issuance process, it used the bookbuilding mechanism (Fatwa No. 69/DSN-MUI/VI/2008 and Fatwa No. 70/DSN-MUI/VI/2008), where the selling agent (as a wakil) collects sukuk reservations during the offer periods. The sukuk underlying assets managed by Special Purposes Vehicle (SPV) as the sukuk issuer that manages all sukuk process disposed of as the rental assets to the government (based on Fatwa No.

95/DSN-MUI/VII/2014 and Fatwa No. 137/DSN-MUI/IX/2020). The government pays the rental to the SPV and will be allocated accordingly to sukuk subscribers (based on Fatwa No. 112/DSN-MUI/IX/2017). The SPV entitles the fees for managing the sukuk as specified in the sukuk memorandum before it is issued (based on Fatwa No. 127/DSN- MUI/VII/2019).

A shariah compliance opinion from DSN-MUI is the utmost requirement to issue the Sukuk and green sukuk issuance.²⁸ For instance, the green sukuk of ST008 in 2021 was based on the Shariah Opinion of DSN-MUI No. B-789/DSN-MUI/X/2021 to confirm the Shariah status before being offered to the investors. The underlying assets of green sukuk were the combinations of state-owned property, fixed asset development, and certain projects/

activities within the Ministry of Finance and other relevant ministries. Furthermore, as financial instruments, green sukuk must adhere to the principles of sustainable finance outlined in Indonesia’s 2015-2019 Sustainable Finance Roadmap and Financial Service Authority (POJK) Regulation No. 51 of 2017. Unfortunately, both fatwa and shariah opinion did not specify the environmental values associated with spiritual-based values that green sukuk cohered with.

3. Environmental Values in Islamic Equity Instrument

The awareness of environmental issues has been raised recently. Particularly, the motivation to consider ecosystem-friendly (eco-friendly) products and business instruments received considerable support.²⁹ At the moment, the Paris Agreement is the main reference to implementing eco-friendly development, reducing carbon production, minimising fossil fuel consumption, and excessive natural resources exploitation. Additionally, the Paris Agreement governed the financial mechanism with an eco-friendly system.³⁰ Immediately, the conventional investment transformed into sustainable investment constituted the environmental, social, and governance (ESG investing) considerations. Technically speaking, to implement ESG investing, the investor might assess the list of companies in the stock exchange that gained high scores of environmental and social indexes issued by independent parties.³¹

27 Siti Nur Mahmudah, Muhammad Lathoif Ghozali and Iskandar Ritonga, ‘Implementation of Sharia Maqashid on Sukuk Based on Fatwa Dsn-Mui/Ix/2020’ (2022) 22 Jurnal Ilmiah Islam Futura 139.

28 Selamet Hartanto and Devid Frastiawan Amir Sup, ‘Konsep Sukuk Wakaf Dalam Perspektif Fatwa DSN-MUI’ (2021) 6 Muslim Heritage <https://jurnal.iainponorogo.ac.id/index.php/muslimheritage/

article/view/2767>.

29 Ole W Pedersen, ‘Legislative Overreach, Adaptation and Administrative Re-Regulation in Environmental Law’ (2022) 42 Oxford Journal of Legal Studies 818 <https://academic.oup.com/

ojls/article/42/3/818/6549975>; Kakhaber Kuchava, ‘First Post-Legislative Scrutiny in Georgia:

Steps Towards Generating Result-Oriented Laws’ (2019) 3 Journal of Southeast Asian Human Rights 258 <https://jurnal.unej.ac.id/index.php/JSEAHR/article/view/13600>; “ISSN”:”0143- 6503”,”abstract”:”This article interrogates the use of regulatory position statements (RPSsOriola O Oyewole, ‘Navigating The Waters: International Law, Environment and Human Rights’ (2021) 6 Petita : Jurnal Kajian Ilmu Hukum dan Syariah; Muhammad Ridwansyah, ‘Tindak Pidana Kerusakan Lingkungan Dalam Undang-Undang Nomor 32 Tahun 2009 Dan Tinjauan Fiqh Al-Bi’ah’ [2016] Petita.

30 Kevin Sebastian Josua L. Tobing and Wenny Setiawati, ‘Tinjauan Yuridis Terh Uridis Terhadap Efek Bersif Ap Efek Bersifat Utang Berwawasan Lingkungan (Green Bond) Sebagai Instrumen Invest Instrumen Investasi Dalam Penerap Am Penerapan Sust An Sustainable Investment Di Pasar Modal Indonesia’ (2022) 1 Technology and Economics Law Journal Volume 19.

31 Olivier David Zerbib, ‘The Effect of Pro-Environmental Preferences on Bond Prices: Evidence from Green Bonds’ (2019) 98 Journal of Banking & Finance 39 <https://linkinghub.elsevier.com/retrieve/

Sustainable investing has been implemented on both commercial and governmental scale.³² According to,³³ the sustainable investing consists three main distinctive perspectives:

1. Economical perspective, where the investment should be:

a. Generated profit and investment through long-term and short-term production strategy, not only maximising short-term profit.

b. Generated profit should be based on real economic activities.

c. Fulfiled basic necessities.

d. Generated profits are not based on prohibited activities.

2. Environmental perspective, where the investment should be:

a. Resource productivity enhancement.

b. Sutainabile resource investment.

c. Raw material from Recycled resources.

d. Local and worldwide environmental systems that allow for the operation of 3. Sustainable perspective, where the investment should be:

a. Human resource development (workforce, education and development responsibilities).

b. Social resource development (creating job opportunities, cross-generation equalities, free-discrimination treatment toward minority group).

c. Cultural resource development (cultural diversity dignity and empowerment, includes preserving judicial rights, freedom and social integration)

The emergence of COVID-19 disease hit Indonesian major economic sector.³⁴ However, it contributed to the development of the green sukuk market. Because Indonesia was a pioneer in green sukuk issuance, there are a series of reasons might seize this opportunity to penetrate the global market. Global green sukuk is the world’s first sovereign green sukuk. The global green sukuk transaction in Indonesia was evenly spread among high- quality accounts, primarily top-tier fund managers and banks.

To fully utilize Green Sukuk as a means of investment and attract investors to invest in Green Sukuk, the government must concentrate on enhancing four key elements that will ensure all Green Sukuk revenue will be used appropriately. Namely (1) funds will be used entirely for refinancing and new financing of green enterprises; (2) the Ministry of Finance and the National Development Planning Agency assess and approve projects for funding; (3) funds management as the issuer assures that all of the proceeds will be used for green projects; (4) and assessment that is supposed to incorporate greenhouse gas emission reduction initiatives.³⁵

Funds generated from green sukuk will be distributed and transferred to a nominated account of relevant ministries for funding previously agreed-upon limited projects. The Ministry of Finance is in charge of allocation. The line ministries that will benefit from the funds must trace, evaluate, and report to the Ministry of Finance on the positive environmental impacts of the Eligible Green initiatives.³⁶ The Ministry of Finance will

pii/S0378426618302358>.

32 Sarah Crone, ‘The Impact of Municipal Policy-Making on Sustainability: A Reflection on Processes in Darmstadt’ (University of Twente 2019).

33 Mirjam Staub-Bisang, Sustainable Investing for Institutional Investors: Risk, Regulations and Strategies (John Wiley & Sons 2012).

34 Wibowo Hadiwardoyo, ‘Kerugian Ekonomi Nasional Akibat Pandemi Covid-19’ (2020) 2 Baskara:

Journal of Business and Entrepreneurship 83.

35 Staub-Bisang (n 33); Abubakar and Handayani (n 9).

36 Anggraini (n 2).

issue a yearly report on the list of initiatives the quantities of profits awarded to such initiatives, and the estimated beneficial impact of both Green Bonds and Green Sukuk.³⁷ 4. The Practical Approach between Spiritual Consideration and Environmental Initiatives Green sukuk needs to obtain shariah objectives, legal maxims, and jurisprudential applications to fulfill shariah compliance values. Considering its issuance trend has been higher throughout the years, Indonesian green sukuk needs to consider the sharia compliance implementation. The public interest (maslahah ‘ammah) is an indicator to distinguish regardless if the green sukuk benefits the society.³⁸ Up to this time, it is only a green sukuk 2018 report available and published widely. The implementation of protecting the environment, which become the utmost objective of green sukuk and indicated as preserving public interest, covers only five out of nine green sectors; renewable energy, sustainable transports, waste to energy/waste management, sustainable agriculture and resilience to climate for disaster risk area.³⁹

Initially, the green sukuk was deemed as the means to preserve nature and natural resources (hifz al bi’ah). Despite the fact this preservation is unstated explicitly in previous literature, it is considered part of preserving the religion (ad-din), since there are numerous verses indicated directly. However, there are ambiguous interpretations of how the financial instrument, the underlying assets, and the initiated green projects contributed to religious preservation. Since there are none of these projects state the indicators and barometers if such projects successfully preserve the religion.

Subsequently, from a property preservation (hifz al-mal) perspective, the authority demands all the green sukuk projects adhere to the framework of the Center for International Climate Research Organisation (CICERO) as stated in the report. The topmost indicated part is the greenhouse gas emissions reduction. Property preservation was assumed to be completed when the investors’ capital was well-managed during the green sukuk period. Meanwhile, there are lack of barometers to assess the effectiveness of green sukuk in preserving public wealth being preserved widely.

Ultimately, from the viewpoint of preserving life (an-nafs), intellect (al- ‘aql), and offspring (an-nasl), exhibited by the core of the green sukuk objective to protect the earth from climate change and reduce carbon. This effort aims to ensure the long-term existence of all organisms on Earth. The implementation to achieve that can be seen through the green sukuk fund utilisation report in 2018 by the Ministry of Finance. The Regional Resilience/

Risk and Disaster Vulnerable Sector has the most projects, with 241 projects and a budget of IDR 7.19 trillion.⁴⁰ Nevertheless, there are lack of correlation indicators with the focus impact of preserving the life, intellect, and offspring as a specific objective. Hence, the report excessively relied on the environmental objectives and statements.

5. Potential Clash or Norms Between Green Sukuk and Shariah Compliance values The author derives a potential for discord, norm clashes, and incoherent material from the findings made here. The law No.19 of 2008 on State Islamic Securities (Surat Berharga Syariah Negara – SBSN), the Shariah opinions of green sukuk issuance (i.e. Shariah Opinion of DSN-MUI No. B-789/DSN-MUI/X/2021), the Fatwas of DSN-MUI and sovereign green sukuk report of 2018, have been unable to yield accurate assessments on Shariah

37 Risanti and others (n 10).

38 Naily Rohmah, Abd Rohim and Sri Herianingrum, ‘Sovereign Green Sukuk Indonesia Dalam Tinjauan Maqashid Shariah’ (2020) 5 Jurnal Penelitian IPTEKS 259 <http://jurnal.unmuhjember.ac.id/index.

php/PENELITIAN_IPTEKS/article/view/3666>.

39 Abubakar and Handayani (n 9).

40 Rohmah, Rohim and Herianingrum (n 38).

compliance assurance implementation while supporting the projects’ environmental interests. This was alerted by the appearance of possible norm clashes, as follows:

1. Early redemption period, which is predefined in the green sukuk memorandum. It violates the nature of shariah, where the sukuk is a representative of the underlying asset. Hence, when the buyer and seller meet the conditions, the transaction is deemed fit.

2. Profit distribution based on green sukuk coupon rate is most likely to be in the conventional approach, where payouts are predefined. This could lead to conflicts with the nature of Shariah and the key premise of Shariah compliance through the Islamic financial system.

3. The use of conventional financial institutions as distribution agents in a market with only two Islamic financial institutions out of thirty distribution agents violates Islamic finance ethos. The AAOIFI shariah standard, on the other hand, clearly states in article no. 30 on Monetization and article no. 17 on Investment sukuk that Islamic financial institutions must carry out all necessary operations of Islamic financial instruments, including sukuk management.

4. Unvailability of environmental impact report with detailed indicators and measurement mechanism of the green sukuk. It exhibited the tendency of the sukuk to gather as much as funds as possible and ignore the upmost values of shariah principle and environmental-friendly project

5. The undisclosed Shariah opinion within each of the green sukuk series ignored the Shariah compliance transparency norm.

DISCUSSION

1. The Issuance Impact to Global Sukuk Market

The market demand for green sukuk is particularly high, as investors want not just profit but also the bond’s positive reputation and spiritual values. This can be used to demonstrate the company’s care for issues related to the environment. Climate change issues have a direct association with green bond demand since it provides credit to the investor; therefore, investors should keep it to maintain their good image.

The author indicates that the impact of Indonesian sovereign green sukuk must be recontextualized. Through quantitative analysis, it reveals that the spiritual belief basis has a negligible impact on sophisticated financial firms. The computation into the Cumulative Abnormal Return (CAR) between post-event, event, and pre-event has supported the null hypothesis, with the implementation not affect the CAR. This discussion may provide an answer to question one.

2. The Outrange of Sovereign Green Sukuk

Schmitt stated that green bonds traded at a lower rate of return than others in 2016 and 2017, but they tended to fall without making a meaningful impact.⁴¹ Whereas, broadly speaking green bonds have a better link to the fixed-income market. This would not provide investors with a way to diversify their green bond investments with other similar assets.⁴²

Meanwhile, the sovereign green sukuk has two distinguished values offered to the investors, still unable to attract the major investors to transition from the conventional green bond markets. At this vantage point, the author argues that a new approach to implementing

41 Stephan Jakob Schmitt, ‘A Parametric Approach to Estimate the Green Bond Premium’.

42 Juan C Reboredo, ‘Green Bond and Financial Markets: Co-Movement, Diversification and Price Spillover Effects’ (2018) 74 Energy Economics 38 <https://linkinghub.elsevier.com/retrieve/pii/

S0140988318302032>.

complete assessments of the environmental and Shariah compliance goals indicators is required. A proper study for a green sukuk development report system, combined with expert assistance, will prevent injudicious value hybridisation. We also provide insight into the concurrent effect of how the green sukuk issuance only pleased a limited portion of the business. This discussion may provide an answer to question two.

3. The Real Objective of Green Sukuk

The Indonesian green sukuk, which based on the law No.19 of 2008 on shariah government securities successfully seized the opportunity to penetrate the global sukuk market and attract cross-border investors who seek multiple values in a medium of investment.

There is a need for sophisticated assessment resolutions carried both environmental and shariah compliance sides. Its goal is to increase awareness and create Shariah-compliant financial instruments for investing in climate-change prevention measures. Hence, green sukuk could realise the main principle of Shariah compliance and environmental values.

For global green sukuk itself, there have been some recent occurrences. A local institution in Malaysia, the world’s largest sukuk issuer, has developed green mortgages to ease solar system installation, while an Islamic financial institution in Jordan is exploring alternatives to medium-term loans to fund energy-efficient and renewable energy projects. This discussion may provide an answer to question three.

CONCLUSION

According to this study, the issuance of Indonesian green sukuk is a less attractive investment product. The issue did not affect the Cumulative Abnormal Return (CAR) of the sukuk market’s selected indices (with all three categories) and contributed only minimally to the direct effect on the economy. By applying the two-tailed assessment to test the hypotheses, the outcome was unable to reject the null hypothesis, demonstrating that green sukuk issuance had no direct effect on the indices’ performances.

For the values’ realisation of both sharia compliance and the environmental side, the green sukuk unspecified the detailed indicators and measurement methods to be described. In the conclusion, the author suggests the authority to form a comprehensive framework and assessment methods to examine whether green sukuk has achieved it goals environmentally and spiritually.

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