Posted inESG

AIIB sets climate change targets

The Asian Infrastructure Investment Bank (AIIB) will align its public and private financial flows with the goals of the Paris Agreement.
Bamboo pedestrian hanging bridge over river in tropical forest, Bohol, Philippines, Southeast Asia

The China-led multilateral development bank has set a deadline of 1 July 2023 to meet the climate change targets agreed in 2015.

It currently estimates its cumulative climate finance approvals will reached $50bn by 2030, which represents a fourfold increase in annual climate finance commitments since AIIB started publicly reporting the number in 2019, Jin Liqun, president and chair of the board of directors at AIIB told a press conference this week on the sidelines of the 2021 AIIB annual meeting.

“We intend to adopt a framework developed jointly with other multilateral development banks to ensure our investments are aligned with the Paris Agreement. The internal operations are consistent with it and with the needs of our members,” said Jin.

The AIIB will also implement initiatives to drive investment and mobilise private capital to accelerate “inclusive low carbon growth” and intends to integrate “mitigation and adaptation measures” into infrastructure investments.

“We will seek out best-in-class technology to increase climate resilience and better prepare developing Asia to respond to extreme weather events intensified by climate change,” he said.

Access to capital markets

Crowding in more capital would be necessary to fill the financing gap, creating an ecosystem to encourage more private financing for our members to build resilient infrastructure; lower carbon energy solutions will be at the crux of its strategy, Jin said.

He highlighted three projects which have made an impact. First, the $500m AIIB Asia ESG Enhanced Credit Managing Portfolio which is managed with Aberdeen Standard Investment, and invests in Asian infrastructure-related bonds.

Second, the $500m Asia Climate Bond Portfolio with Amundi, which targets emerging market corporate debt, and third, AIIB’s Bayfront Infrastructure Management with Clifford Capital Holdings, which buys infrastructure loans from financial institutions and distributes them to institutional investors through the creation of infrastructure asset backed securities.

“These three operations are very important for AIIB to mobilise resources in the capital markets, and to promote a climate change of financing,” said Jin. “It is also important for the bank to reach out to smaller investors to help finance for less capital-intensive infrastructure operations which would be contribute to the reduction of greenhouse gases, he added.

The Paris Alignment commitment would apply to sovereign and non-sovereign projects, including investments made via financial intermediaries.

Approval process

AIIB is currently testing a process to ensure projects meet low-carbon and climate-resilient standards consistent with the Paris accord. An expanded focus on adaptation and resilience will complement the bank’s target of having climate finance represent 50% of AIIB’s financing approvals by 2025. Climate finance accounted for 41% of the bank’s infrastructure portfolio in 2020, according to Jin.

As of 22 October, the AIIB has approved $28.97bn for 147 projects in 31 member countries. Its top five investment markets are India, Indonesia, Turkey, Bangladesh and China.

AIIB is a multilateral development bank that began operations in Beijing in January 2016 and has since grown to include 103 members worldwide.

Part of the Mark Allen Group.