As the AIIB reviews its energy strategy, will it finally go fossil free?

(China Dialogue, 15 Feb 2022) The bank is spending twice as much on fossil fuels as it is on renewable energy.

At the Asian Infrastructure Investment Bank’s annual meeting last October, President Jin Liqun made a bold statement: the AIIB would align its operations with the goals of the Paris Agreement by 1 July 2023. This commitment followed one the bank made earlier in the year for 50% of its yearly approved financing to be for climate finance by 2025. The AIIB also launched itself as a “green” multilateral development bank (MDB) in early 2016, though has not defined what this means.

Despite the laudable commitments, the AIIB’s portfolio paints a very different picture. For every US$1 the bank invests in renewable energy, it spends almost twice as much on fossil fuels. One of the key blocks to progress is the AIIB’s Energy Sector Strategy. This was already out of date when approved in June 2017: a year and a half after the birth of the Paris Agreement, it failed to rule out fossil fuels, including coal. This matters because the energy sector is responsible for around three-quarters of the world’s greenhouse gas emissions and so holds the key to tackling climate change. The AIIB is also an outlier amongst MDBs, the majority of which have publicised their climate priorities in a climate change action plan, strategy or framework. To date, the AIIB has not responded to calls for it to do the same, giving little substance or accountability for its ambitions and actions to tackle climate change.

After much pressure, and the new looming deadline to align with the Paris Agreement, the AIIB is finally due to revisit its Energy Sector Strategy this year. An initial conversation took place at Board level in December 2021. While no further information is yet publicly available, the review is expected to kick off in the next couple of months. It is vital that the review is comprehensive and steers the AIIB towards a genuinely low-carbon future. Initial signs raise concerns, however, including the relabelling of “review” to “update” and hints from shareholders that the bank aims to conclude the whole process in no more than six months.

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China Dialogue, 15 Feb 2022: As the AIIB reviews its energy strategy, will it finally go fossil free?