Top priority will account for more than half of new financing at Asian Infrastructure Investment Bank
The Asian Infrastructure Investment Bank, Beijing’s answer to the World Bank, is set to unveil a “climate action plan” this week 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 policy and strategy at the AIIB, in an interview with the Financial Times. “The majority of emissions come from Asian countries.”
The focus on climate lending reflects the AIIB’s desire to establish itself as part of the international financial architecture, after US hostility to its creation in 2016. It builds on the bank’s 2020 pledge to stop financing coal-fired power stations and other coal-related projects.
The plan, which is due to be announced at the bank’s annual meeting in Egypt this week, envisages a tripling by 2030 in annual lending for projects to fight climate change. This would make climate finance the bank’s top lending priority, accounting for more than half of the funds it disbursed, Alexander said.
“Last year, our climate financing was $2.6bn and by 2030, it will be around $7bn to $8bn annually,” said Alexander. “Over the course of this decade, it will be more than $50bn in climate financing that the AIIB is putting out there.”
The AIIB, a China-led multilateral development bank with 106 member countries including the UK, France and Germany, was rocked earlier this year by accusations from its Canadian former head of communications, Bob Pickard, that it had a “toxic culture”.
Pickard, who abruptly left the bank in June, alleged that the Chinese Communist party ran the bank from the shadows “like an internal secret police”. The Canadian government subsequently said it was suspending ties with the AIIB while it investigated Pickard’s complaints.
Pieter Bakker, senior communications officer, said the AIIB was “fully co-operating” with Canada’s review into the “baseless allegations” made by Pickard. He added that an internal AIIB review had found there was “no evidence of undue influence on decisions taken by the board of directors or management”.
The AIIB’s strategy to boost lending for projects that address climate change is multi-faceted. One aspect is co-financing projects with other multilateral lenders, building on its $4.4bn in funding for 20 such projects with the World Bank between 2021 and the end of August this year.
Others included lending to private sector projects and investing in emerging market equity funds in Asia and beyond, Alexander said.
As well as mitigating climate change, the AIIB would lend for adaptation to its adverse impact, said Alexander, with a focus on making infrastructure resilient to “the next 30 or 40 years of temperature rises”. This meant, for example, raising roads high enough off the ground to withstand extreme flooding and bridges strong enough so they would not be washed away.
Another potential area was “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 force of coastal flooding,” he added.