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The Asian Infrastructure Investment Bank (AIIB), often referred to as Beijing’s response to the World Bank, is gearing up to unveil its “climate action plan” this week. This plan will take precedence and lead to a significant increase in financing.
“The battle against climate change on a global scale will ultimately be determined in Asia,” stated Danny Alexander, the AIIB’s Vice President for Policy and Strategy, in an interview with the Financial Times. “A majority of emissions emanate from Asian nations.”
The AIIB’s emphasis on climate lending is a reflection of its aspiration to establish itself as a vital component of the international financial structure following opposition from the United States during its establishment in 2016. Furthermore, this focus builds upon the bank’s commitment made in 2020 to cease financing coal-fired power stations and other coal-related ventures.
The climate action plan, scheduled to be announced during the bank’s annual meeting in Egypt this week, envisions a threefold increase in annual lending for climate change projects by 2030. This would make climate finance the primary lending priority, accounting for over half of the bank’s disbursed funds, as stated by Alexander.
“Last year, our climate financing amounted to $2.6 billion, and by 2030, it will reach approximately $7 billion to $8 billion annually,” projected Alexander. “Throughout this decade, the AIIB will provide more than $50 billion for climate financing.”
Comprised of 106 member countries, including the UK, France, and Germany, the AIIB is a China-led multilateral development bank. Earlier this year, the bank faced turmoil when its former head of communications, Bob Pickard, accused it of having a “toxic culture.” Pickard, who abruptly departed from his position in June, alleged that the Chinese Communist Party surreptitiously controlled the bank like “an internal secret police.” Subsequently, the Canadian government declared the suspension of ties with the AIIB pending an investigation into Pickard’s allegations.
Pieter Bakker, senior communications officer at the AIIB, affirmed the bank’s full cooperation with Canada’s review of Pickard’s “baseless allegations.” Bakker also stated that an internal AIIB review found no evidence of undue influence on the decisions made by the board of directors or management.
The AIIB’s strategy to enhance lending for climate change projects is multifaceted. It involves co-financing initiatives with other multilateral lenders, building upon its $4.4 billion contribution to 20 such projects with the World Bank between 2021 and the end of August this year. Additionally, the AIIB aims to lend support to private sector projects and invest in emerging market equity funds in Asia and beyond, according to Alexander.
In addition to mitigating climate change, the AIIB plans to provide financing for adaptation measures to counter its adverse effects. Alexander highlighted the focus on constructing infrastructure that is resilient against rising temperatures over the next 30 to 40 years. This includes building raised roads capable of withstanding extreme flooding and constructing sturdy bridges that can withstand the elements.
Another potential area for action is “nature-based solutions,” such as a coastal restoration project in China that involves the revival of mangrove swamps as a barrier against coastal flooding. Alexander noted that mangroves may be more effective in reducing the impact of coastal flooding compared to concrete structures.
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