Our Investment for Strategic Vision

2021 was the first year our operations were guided by our Corporate Strategy, which was approved by the Board in 2020. We continued developing our capabilities and strengthening the foundations laid during our start-up phase.

We generated strong growth with a portfolio of more diversified products and locations. Our investment portfolio growth jumped 48 percent for outstanding loan investments and 104.5 percent for equity investments compared with end-2020. We increased the number of distinct obligors in the Investment Operations portfolio from 103 to 160. We expanded our sovereign lending to three new Members, bringing the total of sovereign borrowers to 28. The number of currencies increased for borrowings rose from 9 to 13 in domestic and international capital markets. We widened offerings of financial and credit products by AIIB to meet increased client demand and aid risk diversification.

Our commitments reflect our Corporate Strategy by focusing on our thematic priorities of Green Infrastructure, Connectivity and Regional Cooperation, Technology-enabled Infrastructure, and Private Capital Mobilization. Our impact ranged from projects that address the effects of climate change as we partnered with private entities to provide communities with renewable power and clean water; help people and goods reach their destinations as we helped finance the building of roads, electric railways, and ports; and bridge the digital divide by providing broadband internet access, among others. In doing so, our projects helped create employment and livelihood opportunities, especially for women and women entrepreneurs; allowed communities to build liquidity and resilience especially during the pandemic crisis; facilitated the transfer of skills to build a pipeline of diverse talent; and enabled people to stay connected, remain in the workforce, continue their schooling online, and gain access to health care. We tracked our impact from 2016-2020 through our inaugural Sustainable Development Bonds Impact Report and will continue to do so as the ensuring information will help us to make data-driven decisions for best results.

We continued to maintain our high standards that are anchored in our key operational policies. In particular, in 2021, we updated our Environmental and Social Policy, following a commitment made in 2016 to review the Environmental and Social Framework after a three-year implementation period. It is intended to enhance operational effectiveness and outcomes by reflecting the experience gained in the relatively short time that AIIB has been financing operations and the recent trends in development policies and practices.

In the coming years, we will continue to bolster our culture, expand our capacity and increase the rigor with which we manage the Bank’s funds.

What Is Infrastructure for Tomorrow

Infrastructure for Tomorrow sets a mission for the Bank by requiring all investments across infrastructure and other productive sectors to add value through one or more of these four thematic priorities:

  • Green Infrastructure
  • Connectivity and Regional Cooperation
  • Technology Enabled Infrastructure
  • Private Capital Mobilization

Our Corporate Strategy outlines how AIIB will realize its mission through five pillars: (i) establishing market position; (ii) achieving impact at scale; (iii) adding value along the project cycle; (iv) serving a broad range of clients; and (v) building the corporate culture. These pillars are complemented by our core principles: (i) high project standards; (ii) financial sustainability and sound banking; and (iii) strong multilateral governance and oversight. We monitor progress through our annual business indicators, which comprise the Corporate Scorecard indicators as set out in the Strategy and several additional indicators corresponding to focus areas highlighted for the year.

Learning from the experience of 2020, we continued to be agile, adaptive and responsive to unexpected changes that arose due to extraordinary external circumstances, in particular, the COVID-19 pandemic and its ensuing crisis and recovery. In 2021, we supported clients with our COVID-19 Crisis Recovery Facility in parallel with our regular investments in line with our Corporate Strategy and Thematic Priorities.

In 2021, AIIB focused on the intersections between COVID-19 crisis needs and Corporate Strategy objectives while remaining responsive to evolving client demand. Five focus areas for AIIB’s business in 2021 were identified to address the COVID-19 crisis while remaining aligned to the Bank’s Strategy objectives: green infrastructure financing, technology-enabled infrastructure financing, private sector infrastructure financing, broadening client reach, and maintaining high project standards. To support a more balanced implementation of our Strategy, the Bank also advanced other areas across the five pillars in the Corporate Strategy, particularly building staffing capacity, foundational expertise and operational readiness to better enable progress, as well as investing in connectivity and regional cooperation, social infrastructure, upstream project support and corporate culture.

We strengthened our operations and put resources toward building green infrastructure and technology-enabled infrastructure investment pipelines, particularly through strategy development, partnerships and project financing. The emphasis on green and technology-enabled infrastructure financing allowed the Bank to support AIIB Members’ efforts to catalyze a green infrastructure-driven recovery and accelerate the adoption of digital technologies, especially for digital connectivity, which became more important during the pandemic.

In line with our Corporate Strategy, we worked with a larger set of clients and AIIB Members across the income spectrum while maintaining a strong focus on Asia. We also broadened our impact by gradually increasing operations with nonregional Members. Three members (Rwanda, Jordan and Hungary) availed of AIIB financing for the first time under the Facility for a total financing of USD666 million. As the COVID-19 crisis has disproportionately affected low- and middle-income economies, we increased our efforts to broaden client reach, particularly those in Asia. We had five vaccine financing projects in China, Indonesia, Mongolia and the Philippines.
Green Infrastructure
In 2021, AIIB continued to originate and structure green infrastructure projects with climate adaptation, climate mitigation and other environmental benefits to support Members’ low-carbon, climate-resilient transition and environmental sustainability and, as the crisis subsides, their pursuit of a sustainable economic recovery and development. We engaged with clients to identify climate and green financing opportunities across key infrastructure sectors and work in close coordination with other multilateral development banks and partners to support a green recovery. Ongoing collaborations with multilateral and bilateral partners and international concessional and grant facilities, such as the GIF and Multilateral Cooperation Center for Development Finance (MCDF), would enhance the Bank’s expertise and capacity to support blended financing in climate-positive and green infrastructure projects going forward. In 2021, 29 approved green infrastructure projects accounted for 88 percent of the total number of approved regular infrastructure projects.

For more information about AIIB’s climate financing, see Climate Financing.

Connectivity and Regional Cooperation
Improving infrastructure connectivity in Asia and promoting regional cooperation and partnership is part of the Bank’s mandate. In our Corporate Strategy, we introduced Connectivity and Regional Cooperation as a thematic priority for financing and set a target to achieve 25-30 percent cross-border connectivity (CBC) projects in actual financing approvals by 2030.

In 2021, the Bank continued to invest in connectivity infrastructure in various sectors and achieved a 20 percent share of CBC financing compared to 26 percent in 2020. The transport sector provided the largest contribution to both the connectivity and regional cooperation thematic priority and the CBC target out of all the sectors financed by the Bank. At the same time, the growth in digital infrastructure and financial intermediary projects contributing to the thematic priority and CBC target also signaled an increasing diversification of our connectivity investments beyond traditional infrastructure.

The COVID-19 pandemic revealed the fragility of mobility and connectivity networks around the globe as transport and supply chain disruptions persisted with no end in sight. 2021 saw a huge drop in demand for passenger transport infrastructure and services amid public health concerns, while demand for logistics, freight and e-commerce surged as people turned to door-to-door goods and services delivery. Across the globe, the massive shift to remote work exposed vast discrepancies in digital access and connectivity between and within countries. The Bank’s financing in connectivity infrastructure aimed to improve the resilience, flexibility, efficiency and accessibility of both physical and digital connectivity infrastructure. In 2021, eight approved connectivity and regional cooperation thematic priority projects accounted for 24 percent of the total number of approved regular infrastructure projects.

Technology-Enabled Infrastructure
The COVID-19 crisis has demonstrated both the importance of digital connectivity and infrastructure and the significant and diversified investments required to reap the benefits of technology. Drawing on lessons learned from the crisis, we supported Members investing in hard infrastructure (e.g., towers, cable, data centers) to strengthen digital connectivity, and, where feasible, soft infrastructure to increase the efficiency and resilience of infrastructure (e.g. digitalization of public transportation, electric vehicles and applications of artificial intelligence). This approach is in line with our Digital Infrastructure Sector Strategy and Corporate Strategy and will further contribute to supporting Members’ efforts to harness digital infrastructure and technology for economic recovery and longer-term sustainable growth. The Bank also worked closely with reputable market players, including leading fund managers focusing on digital infrastructure and technology in Asia, to invest in several innovative technology-enabled infrastructures that demonstrate the Bank’s market positioning. In 2021, 13 approved technology-enabled infrastructure projects accounted for 39 percent of the total number of approved regular infrastructure projects.

Private Capital Mobilization
AIIB aims to support private capital mobilization for infrastructure financing by leveraging our balance sheet and promoting infrastructure as an asset class. According to our Corporate Strategy, the Bank supports projects that directly or indirectly mobilize private financing in sectors within our mandate.

In 2021, the pandemic continued to dampen investor and financier confidence, including in emerging market infrastructure, as government debt levels continued to surge and policymakers shifted to prioritizing health and social welfare with little remaining public funding for infrastructure development or renewal. We therefore doubled down on our efforts to attract the private sector into infrastructure financing and mobilized USD1.3 billion of provisional private capital over the year. We deployed a range of financing instruments to meet client needs, including project financing, syndications, guarantees, structured financing, financing through financial intermediaries, capital market development projects (bond portfolios) that highlight the Bank’s strengths, as well as equity investments (funds and direct equity).

Over the year, we continued to strengthen our reputation as a sustainable investor under our Sustainable Capital Markets Initiative. In March 2021, our Asia ESG Enhanced Credit Managed Portfolio won the Investor of the Year (fund) category of Environmental Finance’s 2021 Bond Awards. This was in recognition of our achievements in innovating and developing the Asian ESG market. In April, we launched our Sustainable Development Bond Framework to facilitate bond investors’ assessments of the Bank’s commitment to sustainable development. The framework outlined how we are adhering to the principles set out in our Environmental and Social Framework and helping Members meet their commitments under the Paris Agreement and the UN Sustainable Development Goals. In the same month, we successfully priced our debut AUD500 million sustainable development Kangaroo Bond, which saw strong uptake in Australia (32 percent) and across the Asian region (55 percent). In 2021, 16 approved private capital mobilization projects accounted for 48 percent of the total number of approved regular infrastructure projects.

Climate Financing

In 2021, the Bank received accreditation to the United Nations Framework Convention on Climate Change (UNFCCC) as an observer intergovernmental organization (IGO) and was represented for the first time at the UNFCCC 26th Conference of the Parties (COP26) in Glasgow, Scotland in November 2021.

At COP26, AIIB’s Vice President for Policy and Strategy, Sir Danny Alexander, as well as Chief Financial Officer, Andrew Cross, engaged with Members, financial institutions, business partners, academia and NGOs and co-hosted side-events with EBRD on Mobilising the Private Sector for Climate-Friendly Infrastructure and with ADB on Scaling up Adaptation Finance in Asia and the Pacific Region. Together with peer MDBs, we also participated in the launch of a series of joint deliverables by MDBs, including the Joint MDB Statement on Nature, People and Planet, the MDB Joint Climate Statement at COP26 and Progress Report: MDBs Working Together for Paris Alignment.

AIIB’s participation at the COP26 concluded a year of close collaboration with peer MDBs on fostering climate action through multilateral collaboration and leadership. In his capacity as Chair of the MDB Heads in 2021, President Jin Liqun ensured the MDB group had a common voice and expressed their commitments to addressing the climate crisis.

These actions reinforced the Bank’s existing climate commitments to scaling up annual climate finance approvals to at least 50 percent by 2025 as outlined in the Corporate Strategy, the USD50 billion cumulative climate finance projection by 2030 and to align all of its operations with the goals of the Paris Agreement by July 1, 2023, as announced by President Jin at AIIB’s 2021 Annual Meeting.

In 2021, AIIB’s climate finance amounted to USD2.9 billion, or 48 percent of total approved financing, up from 41 percent in the previous year. Of the total climate financing, climate mitigation projects—such as renewable energy, energy efficiency and urban public transport—received 78 percent, with the remaining 22 percent being adaptation finance or having dual benefits. The vast majority (82 percent) of climate financing was approved to sovereign clients, while the balance was approved to private sector and municipal government clients. Transport sector projects contributed the highest share (33 percent), followed by energy (21 percent), urban (18 percent), water (14 percent) and finance (10 percent).

In late 2021, AIIB started the process of updating its energy sector strategy to reflect the elevated international commitments to address climate change and to align the strategy with AIIB's own commitments on climate finance and Paris Alignment as well as directions set forth by our Corporate Strategy.

In October, the Economics department co-hosted a workshop in Shaxi, Yunnan, in advance of the UN Biodiversity Conference (COP 15) in Kunming to discuss the relationship between climate, biodiversity and One Health. The workshop focused on; developing a holistic narrative without losing actionable policy, creating coherent policies across disciplines, and how to finance interventions on the scale and timeline needed. The workshop was attended by thought leaders and policymakers active in biodiversity and One Health and included speakers from the Asian Development Bank and the World Bank.

Financing to Achieve the Sustainable Development Goals

As AIIB was established after the adoption of the Sustainable Development Goals (SDGs), it subscribes to the principles of sustainable development in the identification, preparation and implementation of projects and contributes to its Members’ efforts to achieve the 17 SDGs. Thus, AIIB’s financing contributes to higher level development outcomes and goals pursued by its members.

Sustainable infrastructure is integral to the SDGs and is critical to achieving development outcomes. The Addis Ababa Action Agenda on Financing for Development sets out an explicit role for MDBs in steering finance toward sustainable infrastructure.

AIIB’s investments in energy, transport, sustainable cities, digital infrastructure, water, and social infrastructure sectors are directly aligned with the following seven SDGs:

  • SDG 3: Good health and well-being
  • SDG 4: Quality education
  • SDG 6: Clean water and sanitation.
  • SDG 7: Affordable and clean energy.
  • SDG 9: Industry, innovation and infrastructure.
  • SDG 11: Sustainable cities and communities.
  • SDG 12: Responsible consumption and production
In 2020 and 2021, many of AIIB’s investments also contributed to SDG 8: Decent work and economic growth due to the operations under the COVID-19 Crisis Recovery Facility that support maintaining the economic resilience of our members.

AIIB’s investments also contribute to other SDGs. For example:

  • AIIB’s commitment to climate finance can be mapped against SDG 13: Climate action.
  • AIIB’s Environmental and Social Framework aligns with a broad range of SDGs, including SDG 5: Gender Equality, SDG 8: Decent Work and Economic Growth, SDG 10: Reduced Inequalities, SDG 12: Responsible Consumption and Production, SDG 13: Climate Action, SDG 14: Life Below Water and SDG 15: Life on Land. Therefore, AIIB investments, by following the ESF, contribute to these SDGs through safeguard actions.
  • AIIB work in cooperation with our partners (SDG 17) to jointly contribute towards the SDGs in each of our respective domains. These partners include governments, other MDBs, the private sector and civil society organizations.
  • We also ensure “clean” operations (SDG 16), that is, we contribute to building strong governance and institutions by starting with our own institution.
  • AIIB’s efforts to increasingly incorporating gender considerations into projects can contribute to SDG 5: Gender equality.
Additional information on AIIB’s alignment with the SDGs can be found in the annual Sustainable Development Bonds Impact Report.

Social Infrastructure

The Social Infrastructure Department (SID) was created amid the COVID-19 pandemic to promote human capital development in developing members by investing in social infrastructure and related productive sectors. In its first year of operations, SID quickly formed a lean and agile team and successfully processed three high-quality loans, two in the health sector and one in the education sector. The projects were well received by the Board of Directors and have successfully positioned the Bank in these new sectors.

Realizing the critical role of modern health and education in achieving sustainable development goals (SDGs), i.e., SDG3 Good Health and Well-being and SDG4 Quality Education, the Bank’s Corporate Strategy (CS, 2020-2030) made a strategic choice that “While focusing on core infrastructure, AIIB, as it matures, will gradually expand its capacity, role and value-add in social infrastructure and other productive sectors.” Further, the CS identifies important megatrends, such as urbanization, changing demographics, sustainability, technological innovation, and regionalization. These will have significant implications for social infrastructure provisions, as well as for more inclusive and accessible social services.

Considering the high level of uncertainty in the global health and economic situations, AIIB remains open to the existing and emerging challenges in social infrastructure and productive sectors. AIIB will carry out extensive consultations with all stakeholders including our AIIB Members, peer MDBs and international and bilateral agencies, as it continues to develop and refine its focus.

Environmental and Social Framework

Related Topics

Environmental and Social Framework

The Board of Directors approved the revised Environmental and Social Policy, including the accompanying three Environmental and Social Standards and the Environmental and Social Exclusion List (ESP).

Environmental and Social Framework Update. To facilitate better understanding of the Bank’s revised Environmental and Social Framework (ESF), we held a series of targeted training sessions for staff, and ESF briefings for CSOs and NGOs from June to August 2021.

The main revisions to the ESP include clarifying the timeframes for disclosure by the Bank on environmental and social documentation; information disclosure requirements for financial intermediary projects; providing for the use of the environmental, social and governance (ESG) approach in operations involving capital market transactions; further strengthening biodiversity protection, and excluding the use of asbestos from AIIB’s financing.

The revised ESF also provides for increased attention to gender equality, including gender-based violence; and stresses AIIB’s commitment to the provision of equal opportunities for persons with disabilities.

The revised ESP took effect on Oct. 1, 2021.

Portfolio Management

Related Topics

Case Studies

AIIB’s portfolio is growing at a rapid pace. Exponential volume growth is expected to continue in the short to medium term as annual approvals increase year by year. However, our operations have expanded not only in volume. Over time, our portfolio has integrated new and innovative financial instruments, enabling us to diversify our engagement and be more responsive to the demands of our clients, but unavoidably adding complexity to the portfolio. These developments call for robust, active portfolio management functions to ensure that the Bank’s investments achieve appropriate financial returns as well as tangible development impacts, including the achievement of social and environmental targets.

In line with its mission, AIIB supports a diverse pool of clients to achieve development results and financial performance. AIIB manages the Bank’s portfolio of projects and investments through continuous implementation monitoring and supervision, complemented by regular in-person missions and site visits (or virtual missions when physical travel is not feasible). Moreover, we closely manage client relations and any ad hoc portfolio events requiring management decisions.

Through portfolio management, we continuously assess individual project performance against the implementation and operational targets agreed upon at the time of commitment, and we analyze the risks that may affect project implementation. We also monitor progress toward the achievement of the financial and developmental objectives, as expressed in the results frameworks of the operations we finance. This enables us to provide real-time feedback on implementation progress, benefit from early warning signals, and enact timely remedial measures as needed. We also make use of internal tools and rating scorecards to assess risks and implementation performance and apply a differentiated monitoring regime for investments at risk of material underperformance. This enables us to ensure appropriate follow-up for operations requiring focused attention or remedial action.

Proactive risk management is essential to fulfill our mission of financing Infrastructure for Tomorrow (i4t). Through portfolio management, we establish a solid first line of defense against credit, environment and social risks (E&S), fiduciary, reputational and other risks which may negatively affect our investments. As part of our risk mitigation strategy, we regularly conduct priority project reviews for all projects affected by material issues or present substantial E&S risks, as well as stress-testing exercises at the project level for nonsovereign financing operations. These are inter-departmental undertakings which enable us to find solutions to immediate problems and to anticipate the impact of external events on our portfolio–an important lesson learned during the COVID pandemic.

Alongside specific projects and assets, our operations also require monitoring and reporting at the portfolio level. We do so by holding quarterly internal portfolio review meetings and annual or semi-annual tripartite portfolio reviews with major borrowing Members involving their Ministries of Finance and implementing agencies. In these meetings, we discuss the status of all projects under implementation, including their disbursement ratios. Focused discussions are held on operations with material implementation issues. We share portfolio-level updates on an ongoing basis with Board members through a real-time, interactive AIIB Portfolio Dashboard and a portfolio briefing at the Board’s quarterly meetings. As the size of the Bank’s portfolio expands, we increasingly incorporate trend analysis as part of its monitoring and reporting functions.

Over the course of 2020 and 2021, we have enhanced existing portfolio monitoring functions to include newly developed financial instruments. For example, we prepared dedicated monthly updates for projects funded under the COVID-19 Crisis Recovery Facility (CRF). We also carried out quarterly valuations of the Bank’s fund and equity investments and enhanced reporting on financial intermediary operations and equity investments in our Quarterly Monitoring Reports (QMR).

Throughout 2021, portfolio management at AIIB continued to be affected by the challenges imposed by the COVID-19 pandemic, such as mobility restrictions and travel disruptions. Our response included finding alternative implementation processes such as virtual missions, leveraging partners’ field presence, and deployment of IT tools and innovative technologies. At the same time, we strengthened the analytical and administrative support for the Bank’s client-facing investment teams to maximize operational efficiencies. As the pandemic continues to evolve unpredictably, we are taking stock of the lessons learned from this unprecedented challenge. We do so to pursue good practices for future replication and to ensure that our project and portfolio management processes remain fit for purpose.

In carrying out portfolio management, we not only strive to ensure successful delivery for our existing operations, but we also seek to foster a culture of learning for informed decision-making and enhanced performance through continuous early learning and by creating active feedback loops from project implementation monitoring to the preparation of new projects. We understand success not only as compliance but also as an evidence-backed process focused on results. As the size of our portfolio expands, we are increasingly incorporating trend analysis as part of our monitoring functions.

We are aware of the key role IT tools can play in supporting the Bank’s investments across the project cycle and facilitating access to information and analysis. In 2021, AIIB invested extensively in developing IT systems and introduced the Investment Management Information System (IMIS) and the Equity Investment Management System (EIMS). IMIS will facilitate procedural workflows, operational governance, and document management for all Bank projects while generating project- and portfolio-level data analytics and reporting. EIMS will enable close monitoring of the Bank’s equity portfolio, including client reporting, and preparing valuation memos and equity performance reports. Last, 2021 saw the launch of the Client Relationship Management (CRM) system covering AIIB’s relationships with external partners and entities, including assessments of aggregate counterparty exposure, which is essential for effectivecross-portfolio risk management.

Case Studies
Green infrastructure: Ibri II 500 MW Solar PV Independent Power Plant Project

While Oman’s solar energy resources rank among the largest in the world, the country has traditionally depended heavily on nonrenewable energy sources such as oil and gas. Approved in 2020, the Ibri II 500 MW Solar PV Independent Power Plant Project completed construction in Aug. 2021. The project has now reached the commercial operation stage and the plant has started generating power. Notwithstanding challenges posed by COVID before the commercial launch, including the availability of construction materials, the USD60 million project is now delivering a vast array of economic and environmental benefits. The project is a prime example of alignment with the Paris Agreement in AIIB operations. It sets sizable targets for GHG emission reduction and furthers Oman’s ambitious agenda for a green energy transition.

National Investment and Infrastructure Fund (NIIF), Fund of Funds - I

The economy of India is large and fast-growing. The investment environment in the country has benefited from recent macroeconomic and policy changes. However, to support economic growth in the medium and long term, investing in infrastructure remains a priority. The government has prioritized infrastructure investment over the last decade. While the debt market has provided adequate opportunities, the identification of long-term equity capital has remained challenging. In 2018, AIIB approved an investment in the Fund of Funds (FoF) of the National Investment and Infrastructure Fund (NIIF). The NIIF was launched as a platform to attract national and global institutional investors to financing infrastructure projects in India. Besides the FoF, it includes a Master Fund and a Strategic Investment Fund. The FoF invests in portfolio and subportfolio funds in a variety of sectors, which include green infrastructure, mid-income affordable housing, infrastructure services, social infrastructure, urban infrastructure, industrials, and telecommunications. In 2021, the FoF reached its final closing. In addition to AIIB, the Asian Development Bank (ADB) and the New Development Bank (NDB) also committed resources to the FoF, for an amount of USD100 million each.
Keppel Asia Infrastructure Fund (KAIF)

In November 2021, the Keppel Asia Infrastructure Fund (KAIF) reached its final closing. KAIF is a private equity fund investing in growth capital and operating under the Keppel Corporation in Singapore. KAIF’s target investments include different types of infrastructure, such as power generation, digital infrastructure, energy, and environmental waste and water assets. As part of this Fund, AIIB intends to support investments for trade and infrastructure connectivity for Asian countries, or investments seeking to support public goods such as the transition to renewable energy. AIIB has committed USD100 million to KAIF’s Main Fund. Keppel has raised total capital exceeding USD660 million for fund partnership and an additional USD260 million for co-investment vehicles. A broad range of investors participated in the Fund, including sovereign wealth funds, pension funds, and commercial banks.