A comparative analysis of green sukuk and green bonds

Purpose The purpose of this study is to examine whether green sukuk and green bonds exhibit distinct performance in the market, assessing whether they function as separate financial assets. Additionally, it analyses their market dynamics to determine the extent of their connectedness within Malaysia’s green finance sector. Design/methodology/approach The data include yield to maturity for each working day over an 8-year period, from 1 January 2017 to 2 April 2024, for both green sukuk and green bonds. This study investigates the difference between the two instruments and measures their performance using statistical approaches, such as a paired sample t-test and the Granger causality test. Findings This study reveals a significant difference in mean returns between green sukuk and green bonds, indicating distinct return profiles. Additionally, it finds that green sukuk offers higher returns than green bonds. Finally, this study finds no causal relationship between the two markets in Malaysia, demonstrating that green sukuk and green bonds are distinct financial assets. Originality/value To the best of the authors’ knowledge, this is the first empirical analysis to examine the performance of green sukuk and green bonds using an extensive green sukuk data set.