As the 26th United Nations Climate Change Conference (COP26) goes underway in Glasgow, Scotland, the United Kingdom’s COP26 Regional Ambassador for Asia-Pacific and South Asia welcomed the Asian Infrastructure Investment Bank’s (AIIB) announcement that it would align its operations with the Paris Agreement.

“AIIB’s confirmation of a date for Paris alignment is a landmark commitment that will be welcomed across this region and will put it among the leading multilateral development banks (MDB) at COP26,” said Ken O’Flaherty at the Paris alignment webinar of the 2021 Annual Meeting of the AIIB Board of Governors. O’Flaherty added that the fundamental backdrop of all MDB climate action has rightly been Paris alignment.

“(Paris alignment) would mean MDBs are aligned with the long-term needs of their clients, members and the realities of climate science,” said O’Flaherty. “This is a huge undertaking and MDBs will need to asses every project’s fit with nationally determined contributions, with specific Paris standards and with climate resilience.”

This, in turn, will open up new investment opportunities that will ultimately be more sustainable and drive green growth in the MDB members concerned.

“That’s why announcing an alignment date is so important for AIIB,” said O’Flaherty. “I am glad the Bank will be able to showcase their wider climate work at COP26.”

2021 AIIB Annual Meeting Flagship Seminar—Paris Alignment Opportunities and Challenges

Jin Liqun, President and Chair of the Board of AIIB, announced Oct. 26, 2021 that AIIB would align its operations with the goals of the Paris Agreement by July 1, 2023. The Bank currently estimates its cumulative climate finance approvals to be USD50 billion by 2030. This amount would represent a fourfold increase in annual climate finance commitments since AIIB started publicly reporting the number in 2019. Earlier this year, AIIB announced it would target at least a 50-percent share of climate finance in actual financing approvals by 2025. President Jin’s Paris alignment announcement is an important step toward achieving this goal.

O’Flaherty, however, cautioned that we need to look beyond COP26 and see two challenges over the horizon.

“The first is a practical one, that Paris alignment will be difficult to implement,” he said. “All MDBs will need to make efforts to ensure they have the right staff, skills and incentive to ensure that Paris alignment is more than just a slogan, and that it is a real way of doing business. The second is stimulating the demand side of the equation—making sure MDBs are able to connect their capital and that of private financiers with bankable projects that are Paris aligned. MDBs must be able to ensure a pipeline of bankable projects. AIIB has the potential to play a leading role, building on their experience with their Project Preparation Special Fund which helps client countries identify project proposals for sustainable investment.”

O’Flaherty is also pleased to see that MDBs are now working to mainstream nature and biodiversity into their operations. “I’m pleased that MDBs are driving up the proportion of adaptation and resilience financing in their climate finance,” he said. “MDBs are increasing efforts to mobilize private capital for climate where work has to be accelerated rapidly.”

“AIIB’s 50-percent climate finance target by 2025 is leading among the MDBs,” said O’Flaherty. “On behalf of the UK COP26 presidency, I strongly welcome AIIB’s commitment to the climate agenda.”