SOVEREIGN GREEN SUKUK: ENVIRONMENTAL RISK MODEL DEVELOPMENT

Arya Sasongko and Ali Sakti

No WP/02/2020, Working Papers from Bank Indonesia

Abstract: Green Sukuk continues to grow, but it still has problems in pricing. It has an unexplainable pricing difference between Green and Non-Green financing instruments. The research selects to takea fundamental asset pricing methodology that analyzes environmental risk. Sukuk and other financings might finance environmentally-harmful projects which support waste generation and accumulation. We noticed that unique environmental risks impose Sukuk holders, i.e., systemic and reputation risks. Finally, the model confirmed that these risks cause the price difference.

Keywords: Islamic finance; Climate risk; Climate finance; Environmental systemic risk premium; Environmental Reputation Risk Premium (search for similar items in EconPapers)
JEL-codes: F64 G12 L14 Q51 Q54 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2020
New Economics Papers: this item is included in nep-ene, nep-env and nep-isf
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http://publication-bi.org/repec/idn/wpaper/WP022020.pdf First version, 2020 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:wpaper:wp022020

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