AIIB to promote Asian green investment with $500 mln ESG fund
Updated 15:49, 12-Jan-2019
Nicholas Moore
The Asian Infrastructure Investment Bank (AIIB) announced Wednesday plans for a 500-million-U.S.-dollar fund for infrastructure development in emerging Asian markets, with the aim of promoting green and sustainable investments in the region.
After receiving approval from the AIIB board of directors, the AIIB Asia ESG Enhanced Credit Managed Portfolio will focus on infrastructure-related bonds, and compliment the bank's green values.
The concept of ESG (environmental, social and governance) investment is, according to the AIIB, “still in its infancy” in emerging Asian markets. Bonds purchased through the new fund will be screened and assessed under the AIIB's own environmental and social framework.
The focus on sustainability and responsible investing will be important for securing long-term funding, with investors typically wary of putting money into infrastructure projects in emerging markets.
"If only a small fraction of the trillions of dollars currently under management by institutional investors were allocated to infrastructure projects, there would be a catalyzing impact on emerging Asia's growth potential," said AIIB's director general for investment operations Dong-Ik Lee.
Talking to the Financial Times, Lee said that all debt would be U.S. dollar-denominated, with investors promised yields “several hundred percentage points” above current U.S. Treasury levels.
According to the Global Sustainable Investment Alliance, only 0.8 percent of assets in Asia (excluding Japan) comply with ESG standards, compared to 53 percent of assets in Europe.
However, China has rapidly expanded green investment, issuing 36 billion U.S. dollars' worth of green bonds in 2016, more than anywhere else in the world.
The concept of ESG investment began in 2005 with the publication of a study called “who cares wins.” Today, an estimated 20 trillion U.S. dollars' worth of global assets can be classed as complying with ESG factors, representing a quarter of all professionally managed assets in the world.
Headquartered in Beijing, the AIIB is a multilateral bank focusing on development, and was established in 2016.