2018 AIIB Annual Report and Financials

HOW WE'RE DEVELOPING

DOWNLOAD
DOWNLOAD
Share
Share a section of the page
SHARE
Print
Print a section of the page
PRINT
Fold

Operational Performance

Investment Portfolio
We concluded 2018 with 35 approved projects in 13 countries totaling USD7.5 billion in investments. Of the 35 projects, 31 were loan-based (USD7,050 million) and four were equity investments (USD450 million). A total of 25 projects valued at USD5,858 million (78 percent of the portfolio by value) were sovereign-backed and 10 projects valued at USD1,642 million (22 percent of the portfolio by value) were nonsovereign-backed.

Here is a comparative view of AIIB’s portfolio of approved projects over the years:
  • Year
  • Total
  • Stand-Alone
  • End-2018
  • 35 Projects (Total)

    % Change

    2017 52%
    2016 338%
  • 14 Projects (Stand-Alone)

    % Change

    2017 100%
    2016 600%
  • End-2017
  • 23 Projects (Total)

    % Change

    2016 188%
  • 7 Projects (Stand-Alone)

    % Change

    2016 250%
  • End-2016
  • 8
  • 2
  • Cofinanced
  • Sovereign
  • Nonsovereign
  • 21 Projects (Cofinanced)

    % Change

    2017 31%
    2016 250%
  • 25 Projects (Sovereign)

    % Change

    2017 47%
    2016 257%
  • 10 Projects (Nonsovereign)

    % Change

    2017 67%
    2016 900%
  • 16 Projects (Cofinanced)

    % Change

    2016 167%
  • 17 Projects (Sovereign)

    % Change

    2016 143%
  • 6 Projects (Nonsovereign)

    % Change

    2016 500%
  • 6
  • 7
  • 1
Click to generate chart
The energy sector continued to hold the largest share of the portfolio at 34 percent, followed by the transport sector at 24 percent, the water sector at 17 percent, finance and other productive sectors (including ICT) at 17 percent and the urban sector at eight percent.

Twenty-one projects totaling USD4,125.6 million were cofinanced operations (55 percent of approved loans and investments) while 14 projects totaling USD3,374.4 million were stand-alone operations (45 percent of approved loans and investments).

Our portfolio is expected to diversify across multiple sectors in more than 20 countries. The largest number of projects were in South Asia (15 projects). There are currently two projects that provide financing across Asia, including the IFC Emerging Asia Fund (USD150 million) and the AIIB Asia ESG Enhanced Credit Managed Portfolio (USD500 million).

Other operational milestones achieved were the implementation of the Project Prioritization and Quality Framework (PPQ), improving our operations portfolio monitoring dashboard and strengthening our project implementation and monitoring unit.
Investment Pipeline and Alignment
For the 2019-2021 pipeline, we ended the year with 64 projects totaling approximately USD9 billion. Our projects are shaped around three thematic priorities. Almost all projects in our investment pipeline were aligned with at least one of our thematic priorities (some were aligned with more than one thematic priority): three-fourths with sustainable infrastructure, a fifth with cross-border connectivity and half with private capital mobilization.



Here is a comparative view of AIIB’s portfolio of approved investments over the years:
  • Year
  • Total USD Invested
  • End-2018
  • USD7.500 billion Total USD Invested

    % Change

    2017 79%
    2016 343%
  • End-2017
  • USD4.196 billion Total USD Invested

    % Change

    2016 148%
  • End-2016
  • USD1.694 billion
Click to generate chart
Improving Our Projects
ENLARGE
In 2018 we began implementing our PPQ to screen projects and ensure their strategic fit with the Bank’s priorities. The PPQ allows us to focus on results and improve quality at entry and throughout the project life cycle. Five criteria built upon each other are carried through the project cycle: (1) strategic alignment, (2) value addition, (3) project design/expected results, (4) implementation readiness and (5) compliance, effectiveness and efficiency. All sovereign stand-alone projects whose preparation started from July 2018 onward were required to use the PPQ. Work on the PPQ for nonsovereign projects also began in 2018.
Monitoring Green Results
To measure our performance, we are further developing our results framework. Part of this is the development of guidelines on the application of shadow carbon pricing to incentivize investments in greener projects. The indicator on greenhouse gas emission reduction is a mandatory measurement for all energy projects financed by AIIB where applicable. However, it should be noted that emission reduction is only one way of measuring greenness. There are other aspects of being green (for example, environmental protection projects) that are not measured by emission reduction indicators.

Financial Sustainability

Our Shareholder Base
With the addition of two regional prospective members (Lebanon and Papua New Guinea) and seven nonregional prospective members (Algeria, Ghana, Kenya, Libya, Morocco, Serbia and Togo), our membership increased to 93 by the end of 2018, making our Bank the second largest MDB in terms of membership base. As our membership increases, so does our shareholder base, and we benefit from strong support from a broad range of shareholder members. This continued trend is testimony to our members’ trust in our young Bank. We currently have USD100 billion in authorized capital, 20 percent of which has been paid in while the remaining 80 percent of capital is callable. At USD20 billion, AIIB has one of the largest paid-in capital bases of any MDB. We’re committed to using our operational capital wisely, building up our reserves, planning and refining plans to avoid future capital calls.
Triple-A Reaffirmed
The triple-A short- and long-term issuer ratings given to us by Fitch Ratings, S&P Global Ratings and Moody’s Investors Service in 2017 were reaffirmed in 2018. We’re also operationalizing our risk policy to ensure sustainable financial viability and allow us to implement our mandate effectively, thus safeguarding our triple-A ratings.
Return on Capital
In 2018, we continued work on implementing our Risk Management Framework and preparations for tracking the risk-adjusted return on capital (RAROC) of our investments at inception. RAROC measures the extent to which investments yield a sufficient return (hurdle rate), considering the consumption of economic capital and the cost incurred in undertaking the investments. Our RAROC calculation will continue to be dependent on cost assumptions based on peer analysis until our cost accounting system (which is still being established) is ready for implementation. This will also advance the monitoring of portfolio-level returns.
Prudent Spending
ENLARGE
Spending patterns in 2018 show that non-human resource (HR) expenses (58 percent) were higher than HR expenses (42 percent). This is a natural profile for a new organization still in the process of developing its core operating and financial systems for Information Technology, the Risk and the Treasury functions. This higher non-HR spending trend is likely to continue for the next two years as development of these major systems is ongoing. We anticipate that the ratio of HR to non-HR costs will gradually increase starting 2020. Our Management will continue to monitor spending and manage the budget prudently.
Financial Reporting
In 2018, a Bankwide task force on Internal Control for Financial Reporting (ICFR) established by the Office of the Controller began tracking the progress made on closing internal control gaps in areas related to financial reporting. The task force addressed these issues in gap analysis, taking us closer to ICFR compliance and strengthening our internal control. This exercise is seen to enhance the reliability of our financial statements by reducing the risk of material errors or misstatements. We will be able to refine financial reporting controls to provide reasonable assurance that the Bank’s financial statements are reliable and prepared in accordance with International Financial Reporting Standards. A quarterly control report is now presented to the Board to monitor progress.

Organizational Efficiency and Capacity Building

Our Core Values
We strive to be “lean” with a small and efficient management team and highly skilled staff, making good use of human resources and talent.
We strive to be “clean” by being an ethical organization with zero tolerance for corruption.
We strive to be “green” by respecting our living planet in the course of our operations.
Our New Home
Construction of our permanent headquarters located near the Beijing Olympic Park began in September 2016 and has progressed well in 2018. Our new headquarters were designed and built with environmental sustainability features in mind. Our building progressed quickly from receiving Leadership in Energy and Environmental Design (LEED) Gold accreditation to Platinum certification. We expect to settle into our new home in 2020.
Our Human Capital
In line with our “lean” value, we remained focused on expanding when and where needed. From 2016 to 2017 our professional staff headcount increased 66 percent from 79 to 131. A year later in 2018, it increased 42 percent from 131 to 186. Our staff composition also became more diverse, increasing from 36 staff nationalities represented in the Bank in 2017 to 44 in 2018. We will continue to expand based on business needs and according to client demand, as outlined in our Strategic Programming. To support this expansion and to attract industry-leading talents, our Board of Directors approved in 2018 a revised compensation and benefits structure for Bank staff.
Here is a comparative view of AIIB’s staff numbers over the years:
  • Year
  • Total Professional Staff Count
  • End-2018
  • 186 Total Professional Staff Count

    % Change

    2017 42%
    2016 135%
  • End-2017
  • 131 Total Professional Staff Count

    % Change

    2016 66%
  • End-2016
  • 79
  • Female Professional Staff
  • Nationalities Represented
  • 59 (32% of total) Female Professional Staff

    % Change

    2017 40%
    2016 228%
  • 44 Nationalities Represented

    % Change

    2017 22%
    2016 91%
  • 42 (32% of total) Female Professional Staff

    % Change

    2016 133%
  • 36 Nationalities Represented

    % Change

    2016 57%
  • 18 (23% of total)
  • 23
Click to generate chart
Our Staff Culture
Our Staff Culture
ENLARGE
In 2018, we organized a Culture Steering Committee representing senior managers across departments. This was soon followed by the launch of our Cultural Attributes, AIIB’s culture-building road map. The Human Resources Department has been working with over 70 staff volunteers to translate these attributes into concrete bottom-up programs such as idea creation, diversity and inclusion and peer-to-peer recognition. The objective is to build a unifying culture that represents AIIB’s multilateralism, modernism and mission.
Our Staff Rules and Legal Framework
In 2018, the Office of the General Counsel advised and assisted the Bankwide effort to consolidate our Internal Legal Framework, enabling the interior rule of law at AIIB. The President issued critical new Staff Rules establishing ethics investigation and misconduct procedures together with implementing an Administrative Review Procedure to internally address employment-related disputes. Important new directives were also issued concerning security and safety, corporate procurement and information classification. In addition, our Staff Rules were reissued to incorporate amendments to the Policy on Compensation and Benefits agreed by the Board of Directors in September 2018.