OUR GROWTH

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2020 AIIB Annual Report and Financials
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The First Five Years: From Start-Up to Growth

Five years since our founding, we are investing in Infrastructure for Tomorrow, responding to the needs of our members and contributing to the fulfillment of the Paris Agreement and the attainment of the Sustainable Development Goals.

Building on Our Foundations

Our Governance in 2020

Board of Governors
Board-of-Governors
ENLARGE
All our powers are vested in the Board of Governors, where each AIIB member is represented by a Governor and an Alternate Governor, both of whom serve at the pleasure of the appointing member. At each of its annual meetings, the Board of Governors elects a Governor as Chair, who holds office until the election of the next Chair.

The Board of Governors has the power to, among others, admit new members and determine the conditions of their admission, suspend members, increase or decrease our authorized capital stock, elect Directors and elect or suspend the President or remove the President from office. Key items included in the Board of Governors program of work for 2020 included the election of the Board of Directors, the election of the President, the acceptance of the invitation from the United Arab Emirates to host the 2021 Annual Meeting, as well as the election of officers of the Board of Governors, with the Governor for the United Arab Emirates as Chair and the Governors for Brunei Darussalam and the Swiss Confederation as Vice Chairs. The Board of Governors reviewed the Bank’s capital stock, resolving that it would remain unchanged subject to the next review, currently scheduled for 2025.

Fifth Annual Meeting

The annual meeting has been our annual flagship event since AIIB began operations in 2016. The fifth Annual Meeting of the Board of Governors took place on July 28-29, 2020 virtually. Its theme was Connecting for Tomorrow. With technology, we used the Annual Meeting as a platform to engage with a wide range of stakeholders even under the exceptional circumstances of the COVID-19 pandemic. The Board of Governors completed its official business, including guiding AIIB’s strategic direction and electing the President. The Board of Governors approved the date and venue of the next annual meeting, as well as the next Chair and two Vice Chairs.

Election of the President

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AIIB Board of Governors

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AIIB Membership

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The 2020 election was and future elections will be governed by the Rules for the Election of the President, adopted by the Board of Governors in December 2019. For details, see Process for Election of the President.

On July 28, 2020, Jin Liqun was elected, by acclamation, to a second term as President of AIIB by the Board of Governors. The election result was announced by the Chair of AIIB’s Board of Governors during the Bank’s fifth Annual Meeting. President Jin’s second five-year term began on Jan. 16, 2021. The election was successfully conducted following the Rules for the Election of the President of AIIB, which were designed to ensure an open, transparent and merit-based selection process.

Delegation of Oversight Functions

The Board of Governors has delegated a broad range of operational oversight functions to the Board of Directors.

Board of Directors
The 12-member Board of Directors, elected by the Governors, is responsible for the strategic direction of our general operations, including setting our policies and strategies and overseeing their implementation.

The Board of Directors is nonresident in line with our lean culture, exercising all powers delegated to it by the Board of Governors. The Board of Directors meets regularly and frequently, as often as business requires—in physical meetings and through videoconferences—and maintains regular communication with Management between meetings. Under the direction of the Board of Directors and as its Chair, the President conducts the Bank’s business and is held accountable for efficient day-to-day operations.

Prevented by COVID-19 from holding in-person meetings, the Board of Directors held more frequent virtual meetings, ensuring that it could continue to guide AIIB in deliberations over risks, strategies and visions. AIIB was thus able to rapidly bring projects forward—particularly those under the COVID-19 Crisis Recovery Facility—for Board approval. The Board of Directors held 19 meetings in 2020, all electronic, compared with 2019, when it held nine meetings, of which four were physical and five electronic.

As part of its agile response to COVID-19, the Board of Directors had many virtual engagements with members.

We held virtual regular elections for the Board of Directors in June 2020, one month before the expiration date of the term of the incumbent Directors. Nine regional and three nonregional Directors were elected to serve a regular two-year term, from July 1, 2020 to June 30, 2022.

Accountability Framework

In April 2018, the Board of Directors approved the Accountability Framework. The document clarifies the division of responsibility between the Board of Directors and Management, including for AIIB’s strategy and approval of investment operations. The framework provides additional tools for the Board of Directors to hold the President and Management accountable.

Following a transparent process, the President may approve projects that fulfill predefined requirements and shall submit to the Board of Directors the summaries of projects based on predetermined criteria. First, beginning in 2020, the projects must have passed concept review by the Investment Committee, composed of the Chief Risk Officer, Vice President for Policy and Strategy, Chief Financial Officer and the Vice Presidents for Investment Operations, who serve as Co-Chairs. Second, the projects must have been determined for approval within the President’s authority. Third, any Director can call any of these projects before the Board of Directors if deemed necessary. In 2020, the President approved three projects: (1) Bangladesh: Dhaka and West Zone Transmission Grid Expansion Project, (2) Bangladesh: Rural Water, Sanitation and Hygiene for Human Capital Development Project and (3) India: Ayana Anantapumaru NTPC Solar Project.

Oversight Mechanism

The Complaints-resolution, Evaluation and Integrity Unit (CEIU) was established in 2016 as an independent body within AIIB and is part of its Oversight Mechanism, created by the Board of Directors under Article 26(iv) of AIIB's Articles of Agreement. The provision empowers the Board of Directors to regularly supervise the management and operation of the Bank and establish an oversight mechanism for that purpose, in line with principles of transparency, openness, independence and accountability. CEIU is led by the Managing Director, who reports directly to the Board of Directors.

The primary responsibilities of CEIU are to (1) selectively assess the quality and results (for completed projects) of the Bank’s ongoing and completed investment portfolio, (2) serve as the focal point for external requests or complaints regarding compliance with AIIB’s Environmental and Social Policy under the Project-affected People’s Mechanism (PPM) Policy and (3) investigate project-related fraud and corruption cases under the Policy on Prohibited Practices.

Board Committees

To ensure that we perform our mandate based on sound strategies and practices, three committees under the Board of Directors give us guidance: (1) The Audit and Risk Committee reviews the financial statements, reporting practices, the Bank’s financial and risk policies, the effectiveness of internal controls and the internal audit plan as well as reports from the external auditors. (2) The Budget and Human Resources Committee assesses the proposed annual budget and implementation of our compensation and benefits policies and considers any other aspects of the budget and human resources as the Board of Directors may request. (3) The Policy and Strategy Committee reviews the financial and operational policies (such as environmental, social and procurement policies) and advises on strategy development.

In 2020, new members were appointed to each of the Board committees as part of their succession plans. Ai Phing Cheng and Elisabeth Stheeman were appointed external members of the Audit and Risk Committee. We reviewed the terms of reference of the Board committees to ensure consistency with the Bank’s policies and alignment with the latest committee practices.

Senior Management
Staff are headed by the President, who is elected by AIIB shareholders for a five-year term and is eligible for reelection once. The President is supported by AIIB’s Senior Management, which includes the Vice Presidents (for policy and strategy, investment operations, administration and the corporate secretariat), the General Counsel, the Chief Risk Officer and the Chief Financial Officer.

In 2020, we saw the appointment of new personnel for key positions, including our first Chief Economist, Erik Berglöf.

Senior Management completed their management training programs, an 18-month journey that started in 2019.
Sanctions Panel
Functioning independently within the Bank, the Sanctions Panel reviews appeals of sanctions imposed by the Sanctions Officer pursuant to the Policy on Prohibited Practices. Decisions of the panel are final and cannot be appealed.

The remaining elements of the Policy on Prohibited Practices were put in place in 2020 by mobilizing the Sanctions Panel and inducting its newly appointed members. The importance of having a sanctions process was highlighted when the Complaints-resolution, Evaluation and Integrity Unit completed its first investigation. This led to the Bank’s Sanctions Officer imposing sanctions on counterparties under a public-private partnership for the first time. No appeal was filed with the Sanctions Panel.

Strengthening the Bank for Growth

As we transition from the start-up to the growth phase, we continue developing our capabilities and strengthening the foundations built during the Bank’s first five years of operations. We will bolster our culture, expand our capacity and increase the rigor with which we manage the Bank’s funds.

Our Corporate Financing

ENLARGE
In 2020, we added a second pillar to our capital market funding, complementing AIIB’s public transactions, in the form of global benchmarks and smaller public offerings with reverse inquiry issues in multiple currencies. As part of our plan to establish the AIIB name as a prime and frequent issuer in international markets, we issued two global US dollar benchmarks instead of one in 2019 and expanded our market access to several currencies and jurisdictions. We continued our vigorous investor marketing campaign, which went almost entirely virtual beginning in the second quarter of 2020.

All debt issued by AIIB has Use of Proceeds language highlighting our sustainable mission and referring to our environmental and social criteria. To provide investors with a single source of information, we released the Sustainable Development Bond Framework, which emphasizes applying Environmental and Social Policy principles and requirements to every project we finance. All AIIB bonds are issued in the context of the framework.

2020 was an extremely busy year for funding operations. Like many peer organizations, we responded to the call for help to tackle the effect of the pandemic by significantly increasing our financings. Hence, the capital market funding target, which was initially planned to grow to USD6 billion in 2020, was increased to USD9 billion later in the year and successfully executed.

The United States Securities and Exchange Commission–registered Global Program was accessed twice in the year, with benchmark issues in three- and five-year maturities. Highly favorable investor reception allowed us to price USD3 billion in both cases, further contributing to the liquidity of AIIB benchmarks.

In June 2020, we issued our first renminbi-denominated Sustainable Development Bond in the China Interbank Bond Market. AIIB was the first internationally rated AAA issuer to have entered this market since the release in 2018 of the panda bond guidelines governing international issuers. This transaction benefited from extremely strong demand, attracting two-thirds of the orders from overseas investors, underscoring the internationalization of China’s capital markets. The bond carried the “Combating COVID-19” label approved by the National Association of Financial Market Institutional Investors.

We launched our debut bond in the pound sterling market. The GBP800 million five-year Sustainable Development Bond was 1.5 times oversubscribed and contributed to opening more funding channels for AIIB. The issuance met with strong demand, with interest from a broad range of investors, including bank treasuries, official institutions and real money accounts.

We remain committed to establish a presence in major markets as a frequent issuer in line with our mandate as a multilateral financial institution, achieving competitive funding levels that can benefit our borrowing clients.

Our Sustainable Development Bonds will be used to fund the Bank’s investment operations, which are guided by our policies and strategies, including the Corporate Strategy and other strategies covering energy, transport, sustainable cities, water and digital infrastructure, among others.

Our Sustainable Development Bond Framework summarizes and presents the policies and strategies, processes and mechanisms that govern AIIB’s sustainable financing activities. The framework supports our members’ efforts to meet their commitments under the Paris Agreement on climate change and to achieve their targets under the Sustainable Development Goals.

A key component of this framework is our application of Environmental and Social Policy principles and requirements to every project AIIB has financed since our inception.

From 2020 onward, every AIIB financing will ordinarily be aligned with one or more thematic priorities—green infrastructure, connectivity and regional cooperation, technology-enabled infrastructure and private capital mobilization—while building upon our sustainability requirements.

Formats of the Sustainable Development Bonds are intended to include but not be limited to benchmark public bonds and private placements.

Corporate Scorecard

Our Corporate Strategy is complemented by a Corporate Scorecard that (1) monitors progress and holds Management accountable for delivering strategic objectives, (2) provides information on AIIB’s overall performance and (3) facilitates dialogue between Management and the Board of Directors on areas requiring attention. The Corporate Scorecard builds on previous key business indicators of AIIB’s Business Plan and Budget process and will be publicly reported annually to complement other forms of monitoring and reporting to the Board of Directors. The first set of indicators in the Corporate Scorecard is related to impact as defined by (1) financing volume, (2) alignment with thematic priorities and (3) portfolio performance.

The Corporate Scorecard indicators have been mapped to key pillars and principles to monitor progress toward the scorecard objectives. Several additional indicators have been introduced to monitor progress in areas not covered by the Corporate Scorecard indicators. Together, the scorecard indicators and additional indicators will be referred to as annual business indicators in our annual Business Plan and Budget. The annual business indicators will support our gradual shift from being action- and activity-oriented (which was appropriate in AIIB’s early years) to becoming objective- and results-oriented (in line with the Corporate Strategy) as AIIB matures.

Business Plan and Budget

Our annual Business Plan and Budget (BPB) is a key tool for implementing the Corporate Strategy. The BPB eases the alignment of our activities and resources with the agreed strategic directions and the monitoring of our progress.

Shifting priorities and disruptions caused by the COVID-19 pandemic meant that progress toward achieving the Bank’s Key Actions for 2020 was initially delayed. The Bank adapted to changed circumstances, delivered most of its business functions by the third quarter and shortened most of the delays in its regular work plan by the fourth quarter.

Overall, the 2020 BPB remained broadly on track and broadly achieved its objectives, considering the disruptions in the operating environment, which required us to adapt quickly, undertake operations beyond our regular business and adjust our regular operations to be responsive to client demand while maintaining financial sustainability.

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Strategies

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To align better with the Corporate Strategy, from 2021 onward our annual BPB will be structured based on the five pillars of the strategy: (1) establishing market position, (2) achieving impact at scale, (3) adding value along the project cycle, (4) serving a broad range of members and (5) building the corporate culture. The BPB will align with the Bank’s three core principles: financial sustainability and sound banking, strong multilateral governance and oversight and high project standards.

Managing Risk

How We Manage Risk
Our three lines of defense and well-established risk management framework enabled us to respond in a coordinated and effective way to health and economic risks in 2020. We quickly internalized the impact in the COVID-19 outbreak to Bank operations and executed a strong and proactive risk-based response. Even in this uncertainty, we expanded our financial and credit products to meet client demand and improve risk diversification.
A Coordinated, Cross-Functional, Bank-Wide Response to Risk
In the early days of 2020, the COVID-19 outbreak quickly undermined the previously positive economic outlook of AIIB members. The risk landscape steered away from a long and benevolent credit cycle of accelerated and sustainable economic growth in Asia following the end of the 2008-2009 global financial crisis.

Assessments of the seriousness and depth of the health and economic crises and the path-dependent recovery were wide-ranging. The shape and timing of recovery—V-, U- and L-shaped scenarios that could last from a couple of months to years—were not known and there was no clear market consensus about them.

In response to the uncertainty, our Management engaged a coordinated cross-functional task force from investment operations, finance, risk management and strategic departments to assess the pandemic’s risks and impacts. We conducted ad hoc and more frequent stress tests that included bottom-up and top-down analyses across the full range of possible scenarios. We provided the Board of Directors with a robust assessment of the impact on AIIB treasury and investment portfolios, including credit risk quality, operational risks and impairment provisions.

Our strong capital base, which even under the most extreme scenarios of the stress test analysis still showed strong capital adequacy and healthy capital ratios, enabled the Bank to continue to support its members and to provide additional resources under the Crisis Recovery Facility. Management continued to take precautions and a prudent risk management approach, since the assessment showed that the Bank was not fully insulated from credit and operational risks, particularly given its exposure as a provider of countercyclical long-term finance.
Three Lines of Defense and a Well-Established Risk Management Framework
AIIB has been following best risk governance practices since 2016. Our Risk Management Framework (RMF) has supported diversified and overall healthy portfolio growth since operations started five years ago.

The RMF follows the “three lines of defense” model and is anchored on the Risk Appetite Statement, which has been approved by the Board of Directors. The statement promotes active involvement by the Board of Directors and its Audit and Risk Committee in strategic risk consideration. The RMF has resulted in positive feedback from the three main rating agencies, which have noted our commitment and capability to diligently implement the RMF. For the third consecutive year since 2017, Fitch, Moody’s and S&P have reaffirmed our AAA rating.

The Risk Appetite Statement defines our level of appetite for core and noncore risks, but also confirms that there is no appetite for risks (such as reputational or compliance-related risks) that could threaten the institution or jeopardize delivering the Bank’s mandate. The statement describes and sets thresholds for key risk indicators in several tiers, which are reported to Management and the Board of Directors. Any breaches or deviations require an action plan to steer either or both investment and treasury operations. The statement is supported by the risk culture and strengthened by training and increasing awareness of the risk environment.

Management continued to implement risk identification, mitigation and management measures while identifying opportunities to improve risk management practices, particularly those related to climate change mitigation.

AIIB managed to generate strong growth with a portfolio of more diversified products and geographies:

  • Investment portfolio growth leaped 262 percent for outstanding loan investments and 75 percent for loan commitments compared with end-2019.
  • The number of currencies increased from one to five for loans in the investment portfolio and from one to nine for borrowings in domestic and international capital markets.
  • Financial and credit products offered by AIIB expanded to meet client demand and improve risk diversification.
Risk Management Strategies
Portfolio Diversification and Capital Adequacy

We have moved toward increased diversification of products and geographies. Given our mandate to finance long-term and large infrastructure investments and multiple projects with the same sovereign borrower, however, we remain relatively concentrated.

We started implementing further portfolio strategies to manage concentration risk by measuring the impact of our largest borrowers and our pipeline on our overall portfolio credit quality, our net income through expected credit losses (International Financial Reporting Standards [IFRS] 9) and efficient use of our capital.

The concentration risk metrics are linked to portfolio risk concentration limits that are part of the key risk indicators as per the Risk Appetite Statement. These concentration limits target the top-three and top-five concentrations on a portfolio basis rather than single name and member limits, giving us more flexibility to maneuver and operate where there is demand for our involvement.

Stress testing capital adequacy is used to monitor limits and manage capital adequacy and efficient use of capital. The capital adequacy and economic capital framework captures key portfolio risk attributes, including exposure size, correlation, concentration and credit quality.

The stress testing on capital adequacy analyzed in 2020 included scenarios with one-in-25-year shock events, such as a pandemic, trade war or cyber disruption. Even in the extreme scenarios (low likelihood, high impact), AIIB would still maintain extraordinarily strong capital adequacy ratios and withstand the crisis stress, although profitability ratios would be impacted.

Credit Risk

During 2020, we performed various cross-functional assessments of project risk in collaboration with departments involved in relevant areas such as risk management, strategy, finance, investment operations and economics. Collaboration reinforced a comprehensive approach to risk management and increased risk awareness and culture within AIIB.

For example, our bottom-up assessment included analyzing sovereign and nonsovereign portfolios every quarter, with the participation of project team leaders and credit risk teams, to evaluate the impact on each individual exposure with respect to underlying risks such as oil price, foreign exchange and interest rate movements, equity market drop, gross domestic product growth slowdown and unemployment surge.

The assessment was complemented by top-down analysis of the impact of the current macroeconomic scenario on impairment provisions, credit risk quality and other indicators of the investment portfolio, including capital adequacy and other key risk indicators. These assessments accompanied regular portfolio supervision meetings.

As the Bank has a relatively new portfolio and strong capital base, the above-referenced analysis indicated that expected credit losses under IFRS 9 would result in an increase in impairment provisions by AIIB in 2020 but did not suggest that a significant part of our clients would face serious credit problems.

In anticipation of credit deterioration that might require workouts and restructurings, we built capacity before the credit events materialized. We designed an early-warning system and set out criteria to identify problem credits and responsibilities for their management.

Despite the challenging economic landscape and the growth in operations, AIIB had no nonperforming loans as of end-2020, largely because of the prudent risk management approach, close oversight, frequent monitoring and in-depth due diligence and origination process, resulting in strong counterparty selection.

Operational Risk

In 2020, there were no significant operational risk losses. Our experience during this period helped us improve our processes and procedures to reduce exposure to operational risk events, albeit by incurring higher costs. We activated business continuity plans and remote work-from-home arrangements to maintain operations and controls, including strategies to mitigate cybersecurity risk. Heightened risks required innovative solutions: we used technology to carry out supervision missions (drones to monitor construction schedules) and partnered with local banks and entities to carry out on-site due diligence and supervision.

For critical procurement packages, risk assessment is an integral part of procurement evaluation for supplier selection and contract negotiation. Our procurement unit worked with requesting departments to engage qualified suppliers and subscription providers to build the risk management framework and systems for the Bank. Procurement contracts were negotiated to minimize and mitigate associated risks (legal, financial, commercial, reputational and operational).

In view of the increasing risk impacts caused by third-party suppliers to the Bank’s operations, we developed compliance requirements for suppliers, including security, quality assurance and a business continuity plan in bidding documents and imposed an evaluation score for input from bidders, and documented the supplier’s commitment in the contract. To mitigate various operational risks, we established a corporate insurance program that covers the most critical operational and staff liability insurance, as well as insurance for the Bank’s property, as needed.



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AIIB Institutional Responses to COVID-19

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How we Invested in Technology to Manage Risk and Ensure Continuity of Daily Operations

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Climate Change Risk

The Corporate Strategy reiterates our commitment to our clean and green values. In addition to immediate concerns associated with the COVID-19 pandemic, we are experiencing an era of technological disruption and change. Their impact is ever more difficult to assess in core infrastructure sectors (such as energy and transport) because of their extremely long-term investment horizon. To respond and anticipate these challenges, we are developing financial and risk products that tackle the interlinkages of climate, technology and risk and designing risk management tools and processes, such as the following:

  • adding climate change risk to our credit risk tools and internal rating scorecards,
  • assessing third-party suppliers’ risk awareness and resilience to climate change and
  • leveraging technology to proactively drive the climate risk management strategy.
S&P Global Ratings Report on AIIB on Environmental, Social and Governance

"AIIB was set up in 2016 to fill an important infrastructure-financing gap in Asia and to help countries meet their development goals. Although the institution has a short track record, 50% of all projects approved up to 2019 supported green infrastructure. Many of its projects also contribute to the objectives of the U.N.'s 2030 sustainable development goals (SDGs), which include clean water and sanitation, affordable and clean energy, and sustainable cities. On the other hand, AIIB also finances gas and fossil fuel projects. While these are exposed to higher environmental and social risks, they are energy transition projects. AIIB does not have a stand-alone climate change strategy unlike other multilaterals, but it has included a climate change financing target within its corporate strategy and includes climate change as a thematic priority in its sector strategies.

"AIIB is seeking to reduce its exposure to environmental and social risks, and all of its projects adhere to the social and environmental standards of its environmental and social framework. The bank is developing a sustainable development bond framework that applies to all its bond issues.

"The core part of its long-term private-sector strategy focuses on its infrastructure mandate; to expand the bank's role, this would also involve lending to financial intermediaries and investing in equity platforms. The bank's risk appetite statement applies strict limits on equities, although these investments may add material indirect exposure to environmental and social risks. Nonetheless, nearly 54% of its projects are cofinanced with other MLIs, such as the World Bank Group and the European Investment Bank. Lending by these institutions incorporates stringent environmental and social standards, as well as oversight mechanisms."

Clean as a Core Value

We ramped up our integrity efforts in 2020 to ensure the impact and effectiveness of the COVID-19 Crisis Recovery Facility (CRF) financing response and sovereign and nonsovereign financing operations. Our sanctions list was updated quarterly to ensure that AIIB conducted business only with trusted parties. The Office of the General Counsel provided policy support and effective continuous advice on structuring, negotiating, documenting and monitoring an unprecedented number of crisis response investment operations. Support included helping structure the CRF and updating AIIB’s General Conditions on loans in multiple currencies in March and on the London inter-bank offered rate transition in December.

Our Internal Audit Office (IAO) provided professional and objective assurance and advisory services that added value to and improved our operations, adhering to the Mandatory Guidance in the International Professional Practices Framework of the Institute of Internal Auditors, including the Core Principles for the Professional Practice of Internal Auditing, the Code of Ethics, the International Standards for the Professional Practice of Internal Auditing and the Definition of Internal Auditing. As part of its annual work plan, IAO audited investment operations to assess their adequacy for managing risks, governance and internal controls. IAO then identified areas for improvement to AIIB’s processes relevant to the CRF and to sovereign- and nonsovereign-backed financings.

In addition to serving as the focal point for external requests or complaints regarding compliance with our Environmental and Social Policy under the Project-affected People’s Mechanism Policy, and investigating project-related fraud and corruption cases under the said policy, our Complaints-resolution, Evaluation and Integrity Unit (CEIU) reviewed all CRF loan agreements to ensure the adequacy of provisions on the Policy on Prohibited Practices.

We expanded our virtual outreach by placing on our website information about our specific functions. In particular, the CEIU expanded its virtual outreach by developing a subsite with detailed information on the integrity function, including on how to report allegations of suspected prohibited practices under the Policy on Prohibited Practices.

Environmental and Social Framework Review

Environmental and social sustainability is a fundamental aspect of our support for infrastructure development and greater interconnectivity in Asia. Our Environmental and Social Framework (ESF) helps AIIB’s clients achieve environmentally and socially sustainable development outcomes by integrating good international practice of environmental and social planning and management of risks and impacts into decision-making on and preparation and implementation of Bank-supported projects.

In 2020, we began a review of the ESF based on experience in applying the Environmental and Social Policy, including the Environmental and Social Exclusion List (ESEL) and Environmental and Social Standards (ESS), to projects we supported during our initial period of operation. The review follows the commitment we made in 2016 to review the ESF after our first three years of operation. We intend to update the ESF to reflect our operational experience, deal with developments and improve and clarify coverage of the ESEL and ESS.

Civil Society Engagement

We continued our engagement with civil society organizations (CSOs). A management dialogue with CSOs was held virtually in October 2020, covering topics on AIIB’s Corporate Strategy, the review of the Environmental and Social Framework, climate change, AIIB investments and the response to COVID-19. We sought to overcome the restraints of the COVID-19 pandemic and sustained our discussions with CSOs on policy and project issues. We used digital communications more often to hear the voices of CSOs and consider their input to our policies, strategies and projects.

Our People and Our Culture

Recruitment

ENLARGE
By the end of 2020, the total number of AIIB staff members had increased to 326, a net increase of 36 compared with 290 by the end of 2019. Our 316 professional staff come from 54 economies worldwide and women make up 38 percent of professional staff. Almost half of the professional staff (49 percent) perform operational functions. In response to the COVID-19 outbreak, we adjusted our recruitment targets for 2020 to accord priority to positions in operational functions that directly aligned with the key work programs and activities of the year. More flexible arrangements on extension of staff appointment and confirmation of probationary service were implemented. Our Young Professionals and internship programs were put on hold because of COVID-19.

Integrity

The first “Ethics 101” training for Bank personnel was held through 14 interactive Zoom sessions from September to December 2020. A pre- and post-survey was conducted to gauge personnel’s level of knowledge on ethics-related policies and resources and training effectiveness. We saw an increase from 79 percent to 93 percent of Bank personnel who have a good understanding of AIIB’s Code of Conduct. Respondents rated the training 4.13 out of 5 and conveyed the need for future trainings to fully resolve respectful workplace issues. Respectful workplace training will be introduced in 2021, as well as an e-learning module as an induction for newcomers and a refresher for existing personnel.

At the United Kingdom Safeguarding Summit, we contributed to updating international financial institutions’ joint commitment to tackle sexual exploitation and abuse and sexual harassment. Integrity harmonization efforts with other multilateral development banks continued through the unilateral adoption of sanctions imposed by international organizations, which is part of the Agreement for the Mutual Enforcement of Debarment Decisions.

Integrity Matters e-bulletins were sent to AIIB staff throughout the year to raise awareness of integrity issues relevant to COVID-19 Crisis Recovery Facility projects, with suggestions on ways to promote integrity in the projects. Awareness by Bank staff of the Prohibited Practices Policy (PPP) was raised as part of our induction session for new staff and the Operational Training Program. We held a practitioners’ dialogue session with the World Bank’s Integrity Vice President to raise awareness on the risk of fraud and corruption in projects. We launched a revised and more focused PPP eLearning course for staff, which included a section on the risk of procurement in emergency situations such as COVID-19.

To mark International Anticorruption Day 2020, we held various integrity awareness activities in the Bank, including a widely attended virtual keynote speech on COVID-19 counter fraud response by the executive director of the United Kingdom’s Cabinet Office fraud function.

Corporate Culture

ENLARGE
AIIB was one of the first organizations to face what was at the time a new and unknown virus shutting down the country. Following the Chinese New Year break, Senior Management decided to transition to fully remote work. For an organization still in its start-up phase, the change represented a test of our culture, processes and relationships. For many, the shift represented a different way of working, one that required greater trust and flexibility from all staff.

Staff demonstrated resilience, commitment and adaptability over the ensuing weeks and established a strong sense of teamwork. We are internalizing several lessons from the sudden switch to remote work as part of an effort to define an “AIIB way” of working, which seeks to balance agility, empowerment, teamwork, learning and inclusivity.

One of 2020’s primary accomplishments is the approval of the Corporate Strategy. The exercise of examining our past and present to inform our future presented an ideal opportunity to think extensively about the role culture should play in shaping AIIB’s impacts. Knowing that the right corporate culture could be the linchpin that enables us to achieve our 2030 goals or impede our success, culture was identified as one of five key pillars of the Corporate Strategy.

Under the Corporate Strategy, a key element of our corporate culture is a renewed focus on our clients. Clients should feel that AIIB is agile and responsive to their financing requirements, with an approach that is innovative, efficient and responsible, crowds in other financiers and is motivated by an urgent desire to achieve project outcomes.

Our success is predicated on our ability to attract and retain the best people from around the world. Creating a workplace that is high-performing, open, inclusive and international is a top priority. We will build an environment where staff are supported and empowered to achieve their potential, encouraged to share ideas and are appropriately trained—a place where innovation is encouraged and Management lives up to the Bank’s leadership principles.

In the midst of many other challenges we faced during the pandemic, the Culture Steering Committee, which is made up of leaders from across AIIB, recommitted itself to shape the direction of our corporate culture, guided by the Corporate Strategy. As a sounding board and culture-building champion, the committee began developing an action plan.

In 2020, we prioritized three additional areas of culture building by embedding principles and policies to support (1) diversity and inclusion, (2) efficiency and (3) the digitization of AIIB’s operations.

AIIB began working on these priorities in 2020 and was awarded EDGE Certification for ensuring equal access to career opportunities for all staff. Under the lean core value, we established two working groups to explore separate but related areas. One is dedicated to improving processes and reducing bureaucracy and takes both a bottom-up and top-down approach to tap staff’s ideas and suggestions. The other working group is examining how technology and digital tools can enable staff to work smarter and faster. By looking at the experiences of other financial organizations, the working group will identify the best approach to transform our corporate and investment operations by leveraging more new streams of digital technology.

Mission to Green

In 2016, we planned to relocate to permanent headquarters in Beijing. On June 1, 2020, we finally moved in. By the time most staff returned to Beijing, they reported to our new headquarters. The change was massive but our Mission to Green Project ensured that internal communications were sufficient and that staff fully understood the new office environment, which mitigated operational risks and interruptions. Our new headquarters provided us with an opportunity to implement our institutional carbon emission management plan, which is in its early stage. We have set up systems to collect data and analyze building facilities and energy consumption.

Investing in Technology

We are investing in technology that will allow us to be lean, clean and green. In 2020, the pandemic made it even more imperative for AIIB and other organizations worldwide to use digital tools.

In building our flexible and future-proof information technology (IT) infrastructure and architecture, we are guided by three principles: (1) IT aligned with business, (2) cloud first and mobile first and (3) agile implementation. These strategies have proven effective and efficient, particularly during the COVID-19 crisis, and have allowed us to manage our investments and risk, align our new initiatives with our short- and long-term business priorities, ensure continuity of daily operations and improve the way we hire talent.

In 2020, we accelerated the digitalization of core business processes (especially investment operations, project procurement, financial market investment and loan administration), helping streamline our end-to-end investment capabilities. By building Bank-wide shared IT foundations, we ensured that application systems can talk with each other, share common data assets and resist cybersecurity threats. Our Information Technology Department is taking the lead in providing reliable, innovative and efficient AIIB-wide IT solutions, including investing in data encryption tools. As a result, roughly 50 percent of our core business processes are now online.

Managing Our Investments

As our core business becomes more complex, we have adopted suitable IT solutions to manage our investments and support our investment portfolio and operations. By 2020, we had moved many of our investment management business operations online. Our Investment Operations dashboard provides an overview of our portfolio and pipeline projects. Accurate data and reporting help the Board of Directors and Management team get a better view of business insights and contribute to data-driven decision-making and strategic planning.

By end-2020, our Treasury Department was conducting its core business functions digitally and has been able to achieve automatic information flows across different departments through an integrated downstream finance and risk system. We have strengthened the digital capability of Treasury’s support functions by introducing the SWIFT payment system, with initiatives for increased security and compliance control. Several digital tools, such as the Loan Management System for nonsovereign loans and Investment Monitoring Tools, went live in 2020, and work on a solution for sovereign loans commenced. The Office of the Controller initiated the Robotic Process Automation system, which automated three processes, reducing workload and lowering operational risks.

Investment management and servicing continues to be the focus of our future IT road map. We aim to bring end-to-end investment management and servicing functions to several centralized platforms to replace the current interim and manual solutions.

Managing Risk

We have developed a platform to obtain a consolidated view of risk indicators from different systems or tools so that we can comprehensively manage risks and efficiently allocate and utilize capital. The Risk IT Platform enables us to analyze raw data and measure, monitor, calculate and automatically report risk and ensure our capital adequacy according to the Financial and Risk Management Framework. We are developing similar tools to measure nonfinancial risks, including operational risk and compliance risk.

We focused on IT risk management. We initiated a series of projects under the Cyber Resilience Program to maintain our ability to deliver intended outcomes despite adverse cyber events. We implemented IT outsourcing and cloud risk management frameworks to manage the risks associated with the involvement of third parties and cloud vendors.

Supporting Our New Initiatives

We continued with a program to use innovative technologies to help business operations, with various new technologies being evaluated for fitness for business use. Following the successful rollout of Robotic Process Automation, we organized the Innovation Lab guided by the Innovation Management Framework, which defines the methodology for innovation initiatives and experiments within AIIB.

Ensuring Continuity of Daily Operations

The COVID-19 pandemic accelerated the need for a more digital way of working and operating. We provided flexible and secure remote support to staff working outside headquarters. Digital signature functionality was rolled out for contracts, recruiting and onboarding document signing. We launched the Digital Archives to centralize the filing of records online, ease data retrieval and reduce paper filing for environmental sustainability. We developed solutions for offshore payroll payment processing and paperless claim processing so that our staff could receive their benefits on time and seamlessly, no matter where they were.

The advancement and scalability of artificial intelligence technologies offered us an opportunity to face audit challenges. These included the need to remotely systematize a high volume of structured and unstructured data, the need for better linkages between reports across systems and time, such as repeated procedures resulting in repeated risks, the growing number of controls and other silo-related challenges.

To meet these challenges, the Internal Audit Office (IAO) explored the use of iBots to assess accurate and timely public disclosure. IAO deployed automated process mining to gain insights on automated processes, locate bottlenecks and mitigate the absence of project audit visits because of pandemic restrictions.

IAO tapped the vast quantity of geospatial data that is openly available through public, private and voluntary initiatives and developed a proof of concept, where we were able to track and correlate the physical progress of our project monitoring reports submitted by implementing entities. The availability of these technologies in audit will significantly reduce travel time and costly travel expense and increase probity and transparency in our projects.

Thanks to the timely development of two e-procurement systems (one for firms and another for individual consultants), our corporate procurement team was able to support AIIB’s operations without any interruption during the work-from-home period. We took measures to ensure compliance with our Know Your Counterparty and anti–money-laundering and financing of terrorism policies.

Improving How We Hire Talent

The pandemic was an opportunity to advance digitization in our recruitment methods. We partnered with LinkedIn to host a virtual recruitment roadshow with a pilot project focused on Turkish professionals. To increase efficiency and reduce bias in the selection process, we are working on intelligent automated screening tools to assist in screening applications for selected entry- and early career-level positions. We are also integrating pre-employment screening into the online recruitment platform.

Our Partnerships

2020 was a year when the world came together to fight a common threat. The year highlighted the need for global cooperation and partnership, and AIIB did its part.

New Partnerships Unit

The significance of partnerships in AIIB’s business model underlies the need to establish a new, dedicated unit for partnerships and regional cooperation under the Strategy and Policy Department. The unit’s mandate is to strengthen AIIB’s engagement with international fora and other development actors.

Multilateral Development Banks’ Joint COVID-19 Response

As part of the international response to the pandemic, we actively participated in the strengthened coordination efforts at all institutional levels. We participated in numerous discussions with the other multilateral development banks (MDBs), United Nations (UN) agencies and other stakeholders to ensure alignment of regional and country operational responses.

Joint Report on the Sustainable Development Goals

AIIB joined a group of 11 MDBs and the International Monetary Fund in launching the first-ever joint report on financing the Sustainable Development Goals (SDGs). The report was released at the end of 2020, when the COVID-19 pandemic threatened to reverse SDG progress. MDBs collectively mobilized a global response package of USD230 billion in 2020-2021, of which USD75 billion was directed to the world’s poorest economies in 2020.

Multilateral Cooperation Center for Development Finance

AIIB is the Administrator of the Multilateral Cooperation Center for Development Finance (MCDF) Finance Facility established on May 15, 2020 and the host of the MCDF Secretariat. MCDF is a multilateral initiative to increase high-quality infrastructure and connectivity investments in developing economies in compliance with the international financial institution standards applied by accredited implementing partners through information sharing, capacity building and project preparation. It intends to support the implementation of the G20 Quality Infrastructure Principles, the UN Agenda 2030, the Sustainable Development Goals and the Paris Agreement. AIIB is aligned with international goals and frameworks and shares the commitment to improving quality and standards in infrastructure projects.

Building Partnerships

AIIB is being accredited to become an implementing partner with the Global Infrastructure Facility and an observer organization with the UN Framework Convention on Climate Change.

Our Knowledge Products

In addition to our Annual Report, we published the 2020 Asian Infrastructure Finance Report to support business development, stimulate discussion on project finance issues, share insights from and build awareness of AIIB’s investment operations and connect with infrastructure sector experts and practitioners focused on Asia. We published the third volume of the AIIB Yearbook of International Law. The theme of the 2020 edition is Funding International Development Organizations: Innovations of Law and Practice. It was launched during the annual legal conference.

We published working papers and thought pieces primarily on the economic impact of COVID-19 and on climate change.