THE ASIAN INFRASTRUCTURE INVESTMENT BANK'S INVESTMENTS IN FINANCIAL INTERMEDIARIES: URGENT REFORM NEEDED
13 SEPTEMBER 2019
On 13 September, Manushya Foundation co-signed with other 44 organizations a Joint Letter to the Asian Infrastructure Investment Bank's (AIIB) President to express concerns associated with the AIIB’s investments via Financial Intermediaries (FIs), and to request AIIB institute urgent reforms to manage the heightened social and environmental risks associated with this hands-off form of investing.
As around 10 per cent of the overall AIIB investment portfolio is supporting FIs and while investing in FIs can help mobilise funds and attract private capital for economic development, this form of third-party or ‘hands-off’ lending also comes with significant risks - in particular around clients’ adherence to Environmental and Social (E&S) safeguards.
After monitoring certain AIIB investments via FIs, common concerns arise from analysis of some projects:
Lack of information disclosure
Exposure to fossil fuels
Delegation of control to FI clients/co-financiers
With this letter, the undersigned organisations urge the AIIB to address these concerns by: enhancing information disclosure in FI lending; expanding the ESF to include detailed requirements for FI lending; ensuring that FI lending does not open the door further to fossil fuel investments; and introducing ring-fencing of FI investments to support specific projects that are low-E&S risk and have genuine development impact, ensuring this ring fencing is legally enforceable and traceable.
To do so, examples of existing good practice at the AIIB’s peer institutions relating to these common concerns, as well as recommendations on how the AIIB could begin to address policy and implementation gaps are included in the letter.