The AIIB must grab opportunity to tackle the climate crisis or risk falling far behind its peers

The Asian Infrastructure Investment Bank (AIIB) must urgently seize opportunities to safeguard its operations against climate change or else become exposed as a laggard in the multilateral lending sector.

In a new report today, AIIB’s Climate Loopholes, Bank Information Center Europe analyses flaws in the AIIB’s operations and concludes they are fixable, provided the bank shows the courage of its convictions to be a genuine “lean, clean and green” investor.

BIC Europe says the European Investment Bank’s surprise announcement last month to stop lending to fossil fuel energy projects by end of 2021 and invest €1 trillion instead into sustainable green projects has shone a light suddenly on all other multilateral investment banks (MDBs).

“The MDB sector has a huge role to play in translating progressive political signals into sustainable green development at a huge global scale,” said BIC Europe’s Campaign Manager, Petra Kjell.

“We are concerned that the AIIB’s investment portfolio currently shows a two-to-one imbalance in favour of fossil fuel lending over renewables. We acknowledge an improvement on this mix from a year ago, but it is still too slow. We encourage the bank to change its investment strategies to be in more line with its peers,” Kjell said.

The report finds the bank’s stance on coal is extremely ambiguous. “The AIIB has said many times it won’t fund any coal-powered projects, but it has invested downstream into coal-fired industrial processes, like cement-making, which account for more than 20% of global greenhouse gas emissions. And it hasn’t excluded investing in coal mines either,” Kjell said.

The report says the AIIB is increasing its ‘financial intermediary’ (FI) lending, which now stands at $1. 3 billion and growing. This ‘hands off’ model of lending to financial clients is flawed because the AIIB can quickly lose sight of where its money ends up. BIC Europe has tracked some of the AIIB’s FI lending into gas, heavy fuel oil and even coal projects.

BIC Europe says the AIIB needs a climate change action plan, like the other MDBs, to help it address the issue throughout its operations. It needs to stop investing in fossil fuels both directly and indirectly.

Next year the bank will develop its first Corporate Strategy and review its Environmental and Social Framework. “These are opportunities for the AIIB to address its flaws, including its particularly weak safeguard on climate change,” Kjell said.

“The AIIB is collaborating with the other MDBs over the next few years in tackling climate change and aligning with the Paris Agreement. It cannot afford to be dragging its heels against its competitors who may well be demonstrating the stronger actions that we need,” Kjell said.