China-led AIIB launches $500m sustainable bond programme

The Asian Infrastructure Investment Bank (AIIB) has earmarked $500m to invest in a portfolio of bonds issued to finance sustainable infrastructure amid calls for the bank to raise its green finance profile. 

The so-called Sustainable Markets Initiative will focus on promoting investments in corporate, green and quasi-sovereign hard currency bonds in infrastructure-related sectors, the bank said as its annual meeting kicks off in Luxembourg. The bonds will be screened according to environmental, social and governance principles the bank is elaborating. 

The initiative aims at building up debt capital markets for sustainable infrastructure in Asia, beginning with some of the region’s most advanced financial markets such as China, India, Indonesia and Malaysia. 

The bank’s annual meeting is attracting the attention of environmentalists from all over the globe, for whom the bank is falling short in financing green energy projects. Since its inception in 2016, the bank has invested about $1.6bn in gas-powered energy plants and related transmission infrastructure, compared with the $672m invested in renewable energy facilities (including  large scale hydro-power), according to official figures. 

“We want to invest in renewable energy,” AIIB vice president of policy and strategy Joachim von Amsberg said in Luxembourg, highlighting that, among other projects, the bank is financing Egypt’s first solar power plant. “At the same time, hundreds of millions of Asians lack access to power. We have to strike a balance between guaranteeing this access, and promoting lower-carbon technologies. From this perspective, gas-powered plants, which produce half the carbon emissions of the cleanest coal technologies, make sense.” 

The bank is also coming up with a strategy to develop an investment approach in line with the Paris agreement. In its first three and a half years of operations, the bank has approved 45 projects, worth $8.45bn, particularly in the energy, transport and water sectors across its 17 countries of operation. The bank has focused on financing projects from the private sector, as opposed to the concessional finance more typical of other multilateral development banks operating in the region such as the Asian Development Bank.