AIIB prepares to raise $10bn in sustainable development bonds to finance infra in Asia

The China-led Asian Infrastructure Investment Bank (AIIB) has said that all of its bonds can now be considered Sustainable Development Bonds, as it prepares to issue $10bn of paper in coming months.

Last year, AIIB raised $9bn through four benchmark issuances, which  included its inaugural Sterling and Renminbi-denominated bonds. The transactions were subject to the Bank’s Environmental and Social Framework (ESF), which set out use of proceed requirements and a list of excluded activities.

Now, the bank has created a Sustainable Development Bond Framework in collaboration with Crédit Agricole, which introduces requirements for the bank to report annually on the social and environmental impacts of its investments – at both project and portfolio level – in a dedicated report.

The move comes as the People's Bank of China issued "SDG-themed" green bonds yesterday, and updated its high-profile national ‘green bond catalogue’ – the list of definitions for eligible projects to be financed with the proceeds of green bonds issued in China. Described by experts as “an important milestone”, the update brings the Chinese green bond standards more closely in line with those developing in the EU, in part by excluding coal and other fossil fuel power projects for the first time. 

The AIIB’s new framework quotes its President, Jin Liqun, saying, “AIIB will not finance any projects that are functionally related to coal” either – although this does not yet appear to have been written into the Bank’s ESF and exclusion policies.

Examples of indicators which will be disclosed under the bank’s framework include carbon emission reductions, renewable energy capacity growth, number of households with improved access to drinking water and electricity, and hectares of land protected through the building of flood control infrastructure.

Net proceeds from the sale of AIIB Sustainable Development Bonds will be invested according to one or more of four thematic priorities: green infrastructure, infrastructure connectivity within Asia and between Asia and the rest of the world, technology-enabled infrastructure and facilitating private investments into infrastructure.

The Framework also formalises how the Bank’s ESF principles will be applied to project screening and evaluations, and use of proceeds management and reporting. As a result, AIIB says that all of its bonds can now be considered Sustainable Development Bonds, which provide “investors with an opportunity to improve social and economic outcomes in Asia”.

Unlike other multilateral development banks that have issued Sustainable Development Bonds aligned with ICMA’s Sustainability Bond Guidelines, such as the Asian Development Bank and the World Bank, AIIB’s Framework does not reference any existing bond standards.

Last year, RI profiled the AIIB’s ambitious Sustainable Capital Markets Initiative which aims to provide proof-of-concept for the viability of climate change and ESG investing strategies in Asia, and improve the availability of climate and sustainability data across the continent.