How China’s Belt and Road Initiative can get a green push from the Asian Infrastructure Development Bank
When the Asian Infrastructure Investment Bank (AIIB) was founded just over two years ago in Beijing, many in the international community were concerned that the China-led multilateral bank would run roughshod over existing international standards in development finance. For now, the worst fears have not materialised.
The bank has an environmental and social framework, a grievance mechanism, an energy strategy, and has engaged civil society to a certain degree. It has also avoided directly funding any coal, oil and mining projects.
These are positive steps. But the bank now needs to anchor this in policy. It could lead the field in green multilateral infrastructure investment if it took steps to commit to a 100 per cent renewable energy portfolio.
The bank should also ensure its investments in financial intermediary funds subscribe to a strict coal- and oil-free finance policy, to make sure the bank does not finance these projects indirectly, as has been a concern to date. This will send a strong signal of the bank’s long term commitment to sustainability and make the AIIB a “green” leader among multilateral development banks.
Bold steps towards a 100 per cent renewables policy would send a strong signal that China intends to “green” its Belt and Road Initiative. As the most ambitious geo-economic project in recent history, spanning some 70 countries and over US$1 trillion in investments, it’s imperative that institutions ensure high environmental, social, and governance standards in its implementation.
There is cause for concern. A review by French Bank Natixis of the 355 merger and acquisitions transactions in Belt and Road countries found that only US$2 billion went to activities with clear environmental benefits, versus US$28 billion to sectors such as coal, oil and mining. In fact, up to 75 per cent of additional power capacity on the China-Pakistan Economic Corridor is coal-related.
The main funders of Belt and Road projects, the China Development Bank and Export-Import Bank of China, have not published clear sustainability standards or accountability mechanisms. According to the Natural Resources Defence Council, these two banks combined have had the largest proportion of international public financing from G20 countries into the coal industry since 2013.
Too many Chinese companies and banks have financed fossil fuel-based projects, instead of harnessing investment opportunities that have come with China’s leadership in renewable energy investments. The AIIB should also grasp this opportunity, for the benefit of the bank, recipient countries and the planet.
Jennifer Morgan, international executive director, Greenpeace International