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11 May 2021

Natalie Bugalski, Mark Grimsditch, China Dialogue

Asian Infrastructure Investment Bank should extend its social and environmental framework to capital market operations, advocates argue

"The AIIB should include private capital in its environmental framework", 11 May 2021

This month, the Asian Infrastructure Investment Bank’s (AIIB) board of directors meets to decide whether to approve the bank’s proposed new environmental and social framework. The board, made up of member government representatives, should pay close attention to a glaring loophole: a new mode of development financing, which seeks to attract private investment in infrastructure through capital markets, is expressly excluded from the framework’s application. [...]

Unlike anyone else harmed by AIIB-supported projects, people affected by projects financed through capital market operations will not have access to the bank’s Project-affected People’s Mechanism to seek redress. [...]

The bank contends that its normal safeguards aren’t appropriate for these projects because [...] an asset manager can’t feasibly assess the risks on local communities of individual infrastructure projects under this investment model. [...]

The AIIB should take a different tack.

Instead of excluding capital market operations from the Environmental and Social Framework, the framework should be adapted to integrate them, as it currently does with projects involving financial intermediaries, such as commercial banks and private equity funds. [...]