The Asian Infrastructure Investment Bank's (AIIB) Sustainable Capital Markets Initiative (SCMI) aims to drive green and sustainable capital markets across the continent.
The initiative consists of four pillars and has also seen AIIB develop its environmental, social and governance (ESG) framework and its climate change investment framework to catalyse investing strategies and act as an agent of positive impact to improve ESG standards and build capacity around responsible investing with various market participants.
The four pillars are: AIIB’s capital markets portfolios, including the AIIB Asia ESG Enhanced Credit Managed Portfolio and the Asia Climate Bond Portfolio; ESG research on emerging issues and sustainability trends; promoting and expanding ESG rating coverage of corporate issuers with better transparency and disclosure; and capacity building of all market participants to deepen the debt capital markets in emerging Asia and improve the understanding of sustainability through knowledge sharing and industry engagement.
"ESG considerations are not new. Under the AIIB Sustainable Capital Markets Initiative, we are referring to a systematic approach rather than a cursory inclusion of one or more ESG indicators. It takes time to see the influence on financial performance and therefore ESG-minded investors should aim for positive externalities and long-term value creation," said Dong-Ik Lee, director general of the Banking Department Region 1 at AIIB.
AIIB looks to use its own investment portfolios to build evidence-based proofs of concept and acting as a test bed for future sustainable investments. Through these demonstrations it aims to promote investor understanding of ESG concepts.
So far, it has two such portfolios under the SCMI; the $500 million AIIB Asia ESG Enhanced Credit Managed Portfolio, with Aberdeen Standard Investments, to invest in Asian infrastructure-related bonds, and the $500 million Asia Climate Bond Portfolio, with Amundi, targeting emerging market corporate debt. By 2025, AIIB's target is for climate finance to represent 50% of all its financial approvals.