The Asian Infrastructure Investment Bank: Pioneering Climate Action
Introduction
The Asian Infrastructure Investment Bank (AIIB) has become a significant player in the world of international finance since its establishment in 2016. As Beijing’s answer to the World Bank, the AIIB aims to promote sustainable infrastructure development and improve connectivity across Asia. In recent years, the AIIB has gained attention for its commitment to addressing climate change and fostering green growth.
A Climate Action Plan for a Sustainable Future
The AIIB is set to unveil its “climate action plan” this week, which marks a significant shift in its priorities. According to Danny Alexander, the Vice President for Asia Policy and Strategy at AIIB, the plan will make climate financing the bank’s top lending priority, accounting for more than half of its disbursed funds by 2030. This commitment reflects the AIIB’s desire to assert itself as a crucial player in the international financial architecture, particularly in the face of US hostility towards its creation.
Climate change is a pressing global issue, and its impact is acutely felt in Asia. Danny Alexander emphasizes this point by stating, “The global fight against climate change will be won or lost in Asia. Most of the emissions come from Asian countries.” Recognizing the significance of the region’s contribution to global emissions, the AIIB aims to lead the charge in combatting climate change.
One of the defining features of the AIIB’s climate action plan is its commitment to phasing out financing for coal-fired power plants and other coal-related projects by 2020. This bold step sets a precedent for other financial institutions and demonstrates the AIIB’s dedication to sustainable development.
Tripling Annual Financing for Climate Projects
In line with its climate action plan, the AIIB plans to triple its annual lending for projects aimed at combating climate change. The bank aims to increase annual climate financing from $2.6 billion in 2020 to $7-8 billion per year by 2030. This ambitious target will contribute significantly to climate finance, ensuring that resources are directed towards projects that address the pressing challenges of climate change.
By tripling its annual climate financing, the AIIB aims to position itself as a crucial player in funding climate adaptation and mitigation efforts. The funds provided by the AIIB will help countries in the region to develop climate-resilient infrastructure and facilitate the transition to low-carbon economies.
Co-Financing: Partnering for a Sustainable Future
The AIIB’s approach to climate financing goes beyond its own resources. The bank actively seeks co-financing opportunities with other multilateral financiers, such as the World Bank. Through collaboration and partnership, the AIIB aims to maximize the impact of its climate financing efforts by leveraging the expertise and resources of other institutions.
Co-financing allows the AIIB to broaden its reach and support larger-scale projects that have a more significant impact on climate change mitigation and adaptation. The bank has already collaborated with the World Bank on various projects, with a total financing of $4.4 billion between 2021 and August 2021. This demonstrates the AIIB’s commitment to working collectively with other institutions to achieve shared climate goals.
Private Sector Engagement and Beyond
The AIIB recognizes the importance of engaging the private sector in climate financing efforts. Beyond traditional lending to governments and public entities, the bank is exploring opportunities to invest in private sector projects that promote sustainable development and contribute to climate change mitigation.
Investing in emerging market equity funds in Asia and beyond is another avenue the AIIB is exploring to support climate action. By providing capital to funds focused on sustainable investments, the bank can catalyze private sector engagement and stimulate critical investments in low-carbon technologies and climate-resilient infrastructure.
Adapting Infrastructure for a Changing Climate
In addition to mitigating climate change, the AIIB recognizes the importance of adapting infrastructure to withstand the challenges posed by a changing climate. The bank aims to provide loans for adaptation measures that enhance the resilience of infrastructure and protect vulnerable communities from the negative impacts of climate change.
For example, the AIIB highlights the significance of raising roads and bridges to withstand extreme flooding caused by rising sea levels. Infrastructure projects need to be designed and constructed to withstand future climate scenarios, ensuring their longevity and functionality.
The bank also emphasizes the importance of nature-based solutions in climate adaptation. For instance, restoration projects that include the reintroduction of mangrove swamps can serve as an effective barrier against coastal flooding. By exploring innovative and nature-based approaches, the AIIB aims to contribute to climate adaptation efforts while promoting sustainable ecosystems.
An Internal Review: Addressing Allegations
Earlier this year, the AIIB faced allegations of a “toxic culture” within the organization, with accusations that the Chinese Communist Party exerted undue influence. The bank has undergone an internal review, which found “no evidence of undue influence on decisions made by the board of directors or management.”
The AIIB is fully cooperating with an external review conducted by the Canadian government, following the departure of its former Canadian communications chief, Bob Pickard. The bank remains committed to transparency, accountability, and ensuring that its governance practices adhere to international standards.
Conclusion
The Asian Infrastructure Investment Bank’s climate action plan marks a significant step towards a more sustainable and resilient future. By prioritizing climate financing, the AIIB aims to lead the charge in combatting climate change and supporting projects that mitigate its impact. Through partnerships, co-financing, and engagement with the private sector, the AIIB seeks to maximize the impact of its resources and accelerate the transition to a low-carbon economy in Asia and beyond.
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The Asian Infrastructure Investment Bank, Beijing’s answer to the World Bank, is set to unveil this week a “climate action plan” that will become its top priority and spur a sharp increase in financing.
“The global fight against climate change will be won or lost in Asia,” said Danny Alexander, vice president for Asia policy and strategy. AIIB, in an interview with the Financial Times. “Most of the emissions come from Asian countries.”
The focus on climate lending reflects that of the AIIB desire to assert themselves as part of the international financial architecture, following US hostility to its creation in 2016. It is based on the bank’s commitment, by 2020, to stop financing coal-fired power plants and other coal-related projects.
The plan, expected to be announced this week at the bank’s annual meeting in Egypt, calls for tripling annual lending for projects to combat climate change by 2030. This would make climate finance the bank’s top lending priority, accounting for more than half of the funds disbursed, Alexander said.
“Last year, our climate financing was $2.6 billion and by 2030 it will be between $7 and $8 billion per year,” he said Alexander. “Over the course of this decade, the AIIB will provide more than $50 billion in climate finance.”
The AIIB, a China-led multilateral development bank with 106 member countries including the United Kingdom, France and Germany, was rocked earlier this year by accusations from its former Canadian communications chief, Bob Pickard, of had a “toxic culture”.
Pickard, who suddenly left the bank in June, claimed that the Chinese Communist Party ran the bank from the shadows “like an internal secret police.” The Canadian government later said it would suspend ties with the AIIB while it investigated Pickard’s complaints.
Senior communications officer Pieter Bakker said the AIIB was “cooperating fully” with Canada’s review into the “unsubstantiated allegations” made by Pickard. He added that an internal AIIB review found there was “no evidence of undue influence on decisions made by the board of directors or management”.
The AIIB’s strategy to increase lending for projects that address climate change is multifaceted. One aspect is the co-financing of projects with other multilateral financiers, building on the $4.4 billion in financing for 20 of these projects with the World Bank between 2021 and the end of August this year.
Others include lending to private sector projects and investing in emerging market equity funds in Asia and beyond, Alexander said.
In addition to mitigating climate change, the AIIB would provide loans for adaptation to its negative impacts, Alexander said, with the goal of making infrastructure resilient to “the next 30 or 40 years of temperature increases.” That meant, for example, raising roads high enough off the ground to withstand extreme flooding and bridges strong enough to not wash away.
Another potential area involves “nature-based solutions,” such as a coastal restoration project in China that included the restoration of mangrove swamps as a barrier to coastal flooding. “Mangroves are probably better than concrete in terms of reducing the strength of coastal flooding,” she added.
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