SINGAPORE (Dow Jones)--Switzerland-based EnergyMixx AG (EM2.XE)is working on what it says will be the first Islamic bond from a renewable energy firm, a move that highlights the overlap between Shariah-compliant and socially responsible investing.
Both have become more popular in recent years because of an expanding and increasingly market-savvy Muslim investor base and as climate change and sky-high oil prices have focussed attention on environmental issues and alternative fuels.
It's a link that other companies are also looking to take advantage of and could result in a greater crossover between the two markets and a wider investor base for both.
EnergyMixx wants to raise EUR50 million from an 18-month short-term note in the first quarter of the year and establish a EUR500 million debt facility in the second quarter, Artur Dela, chairman and chief executive of the company told Dow Jones Newswires.
The firm will use the funds to develop projects in wind farming, biomass, solar and hydro power in a swathe from southern Italy to Romania and is acquiring technologies to implement them on a larger scale. The firm also aims to expand in the Middle East and India this year.
Meanwhile, Asian Finance Bank, one of only three foreign Islamic banks in Malaysia, is working with AmanahRaya Investment Bank Ltd. to set up a MYR1 billion so-called "green fund" that will invest only in environmentally friendly assets.
"It ties together all the principals of Islamic banking...it is about doing something for everyone," said Asian Finance Bank Chief Executive Officer Faisal Alshowaikh. "Islamic banking is based, one of its objectives, is to help those types of projects to flourish," he said.
The green fund - due to be set up in the second quarter of the year - will also be a first in the Islamic finance world.
Green And Islamic Investing In Tune
Islamic finance is conducted according to the tenets of the Koran, the Muslim holy book. The overlap with socially responsible investing isn't perfect. Islamic finance, for example, bans investment in pork-producing sectors and eschews any assets that derive income from interest payments, which Islam deems to be usury. Socially responsible funds typically have little or no problem with either of those.
However, the two have much in common. Both markets eschew weapons, alcohol and tobacco industries as well as any sectors deemed exploitative. Both also ideally incorporate elements of social responsibility that promote environmentalism, social and community support and economic sustainability.
Bolstering such links would be welcomed by those Islamic scholars who say many new Islamic products do only the bare minimum to comply with Shariah principles and should be replaced with products that comply more rigidly to Muslim ideals, including its more philanthropic goals.
"There are a lot of assets available and it has received worldwide interest," Alshowaikh said of the green fund, which will aim to draw in investors from both the Gulf and Asia.
The Middle East, home to 62% of the world's proven oil reserves at the end of 2006, has benefited enormously from rising oil prices and is looking to put that money to work.
At the same time, many oil-producing countries, seeking to secure their long-term economic future, are also keen to diversify away from traditional energy sources.
The price of oil on the Nymex futures exchange recently hit $100 a barrel, not far from the all-time inflation-adjusted peak of $102.81 hit in 1980.
"There is a lot of obvious interest in renewable energy in the Arab world. They have nothing in terms of renewable energy," said EnergyMixx's Dela.
EnergyMixx, based in Zug in central Switzerland and listed in Frankfurt, is scheduling a drawdown of the EU500 million facility over two years but will accelerate that and set up another program if new projects come on line sooner than expected.
The upcoming sukuk will be backed by various permits that EnergyMixx has to build energy plants or on proprietary technologies in Italy, Albania and other Balkan countries.
"The real value is in the authorizations. The higher the price of electricity, the higher the value of these authorizations," said Dela.