Stockholm (NordSIP) – The Asian Infrastructure Investment Bank (AIIB) and Amundi announced the creation of a US$500-million portfolio dedicated to Asia Climate Bonds, which aims to accelerate climate action in the Bank’s member countries and to assist with the development of the green bond market.
The AIIB is a multilateral development bank (MDB) headquartered in Beijing, which has been operating since 2016 with a mission to improve social and economic outcomes in Asia. The MDB now includes 100 approved member countries worldwide. By investing in sustainable infrastructure and other productive sectors in Asia and beyond, the hope is to connect the peoples, services and markets of the continent with one another.
The development bank’s main backer and the source of its creation is the Chinese government, which is US$29.8 billion in capital contributions, equivalent to 30.8% of the total. Much further behind, India contributed US$8.4 billion, equivalent to 8.7% of all capital contributions, closely followed by Russia’s US$ 6.5 billion worth 6.8%. The AIIB’s creation was motivated by a sense that the World Bank had become too conservative and slow in its investments leading China to develop its own bank in order to support the “One Belt, One Road” initiative.
Amundi and AIIB have developed a first-of-its-kind Climate Change Investment framework, which takes into account three variables: the share of green business activities, climate mitigation and resilience to climate change. These variables are used to analyse issuers’ ability to cope with climate change.
The Asia Climate Bond Portfolio will invest in labelled green bonds and unlabeled climate bonds and engage with issuing companies to help them transition their business models to increase climate resilience and green leadership. The portfolio will seek performance by identifying, analyzing and selecting tomorrow’s climate champions based on this framework.
“This portfolio is another example of how AIIB works with leading partners to develop innovative financial products to deepen capital markets for infrastructure,” said AIIB Vice President and Chief Investment Officer D.J. Pandian. “We expect this investment will demonstrate how international financial institutions can approach development finance differently to support the Paris Agreement and adoption of climate finance principles.”
Through a managed fixed income portfolio of an initial US$500 million, the joint project expects to mobilize another US$500 million from climate change-focused institutional investors. A portion of the investment proceeds will be allocated to market education, engagement and issuer support.
“Supporting Climate Champions and the Paris Agreement in Asia is in line with Amundi’s commitment to ESG investing and reflects our extensive commitment to the region,” commented Yves Perrier, Amundi’s CEO. “We are proud to launch this new initiative in the field of climate finance.”
Over the next few decades, climate change and climate policies will affect all economic actors. The physical impact of climate change will directly impact companies and States, climate mitigation policies will affect all economic actors and widespread support for the ecological and energy transition should see green leaders thrive.
“I am glad to see that a new financial innovation will help support the emergence of green leaders in Asia,” said economist and policymaker Professor Lord Nicholas Stern who also sits on AIIB’s International Advisory Panel. “This comprehensive approach favored by a new public-private partnership between AIIB and Amundi, focusing on the various dimensions through which climate change can impact businesses (including transition risks and physical risks) could help a great deal in mobilizing very large amounts of money for climate action and the energy transition in critical regions of the world. We should expect strong performance—more responsible investment and more modern techniques offer better returns.”