January 5, 2021 Firm News

MHM advised on the innovative Islamic-ESG finance scheme

Naoki Ishikawa, Yuki Matsuda, Yuki Mori, and Tomohiko Adachi acted as the lender's legal counsel on the innovative Islamic-ESG finance scheme, first in the market by a Japanese financial institution.

MUFG Bank (Malaysia) Berhad (“MUFG Bank (Malaysia)”), a Malaysian subsidiary of MUFG Bank, Ltd., has recently entered into a finance agreement to provide AJINOMOTO (MALAYSIA) BERHAD (“AMB”), a Malaysian subsidiary of the Ajinomoto Group, with an Islamic finance-based, sustainability-linked facility.

This is the first ESG finance scheme for the Ajinomoto Group, which demonstrates its strong commitment to achieving the environmental targets of reducing greenhouse gas emissions by 30% by FY 2025 and by 50% by FY 2030, both compared with FY 2018.

The facility will be used to finance the construction of a new plant where AMB develops and produces halal products, and is structured based on Islamic finance framework. MUFG Bank (Malaysia) tailored the facility specifically to AMB’s requests to address ESG considerations as well as compatibility with the halal business. This facility is highly innovative as well as socially significant.

Sharia rules (Islamic law) that underlie the Islamic finance are highly compatible with non-financial indicators which ESG investments and financings take into account. Bank Negara Malaysia (the Central Bank of Malaysia) also promotes the financing method that combines Islamic finance and ESG investment/finance under the initiative of “Value-based Intermediation Financing and Investment Impact Assessment Framework”. The recent remarkable growth of ESG/impact finance is expected to expand and be developed further not only in conventional finance but also in Islamic finance.

Leveraging its extensive experience in both ESG finance and Islamic finance, MHM will endeavor to deepen the understanding of international guidelines and principles in this area and their practical application to the individual transactions. MHM will continue its contribution to the further expansion of ESG/impact finance globally in assisting the clients with achieving their objectives.