The Asian Infrastructure Investment Bank’s (AIIB) expanding portfolio of policy- and results-based operations reflects our commitment to supporting our members to meet their climate and development goals through diversified financing instruments. The Bank’s sovereign-backed financing suite comprises three principal modalities: Climate-focused Policy-based Financing (CPBF), Results-based Financing (RBF) and Investment Project Financing (IPF). CPBF supports government-led policy and institutional reforms that create the conditions for scaled climate action, RBF links disbursements to clearly defined results and IPF provides funds as expenditures are incurred.
However, even the most well-designed public financing instruments can only go so far. In many contexts, private-sector participation is essential for sustaining and scaling development outcomes. This is where the combination and sequencing of instruments become critical to ensure that policy reforms translate into implementable projects and, ultimately, into opportunities that mobilize private capital.
We propose a strategic approach to sequencing and blending our financing instruments to maximize impact and deepen private-sector engagement – both central to our climate finance objectives. To guide this practice, we propose a framework – for selecting and sequencing the most effective blend of financing instruments to align with economy context, reform maturity, sector dynamics and investment opportunities.
In practice, CPBF often sets the stage for downstream finance through RBF and IPF, either sequentially or in parallel. This sequencing enhances accountability, ensuring that policy and institutional reforms go beyond paper commitments and translate into implementable projects while also helping mobilize private capital to achieve measurable climate and development outcomes.
For example, in the irrigation and water-conservation sector, outdated permitting processes or inefficient water allocation policies can delay infrastructure projects, limiting agricultural productivity and climate adaptation. CPBF can support the reform of these policies and streamline permitting processes for irrigation projects. A complementary RBF project can then link disbursements to observable results, such as measurable water savings or expanded irrigation coverage. Alternatively, an IPF can provide upfront funding for critical inputs, infrastructure or capacity-building activities. Together, these instruments help ensure that policy reforms translate into visible, measurable outcomes on the ground while also creating an opportunity for private-sector participation in producing and delivering climate-smart irrigation systems and supplies.
This blended approach demonstrates how well-sequenced instruments achieve the dual objective of strengthening public-sector reform and mobilizing private capital. In emerging markets with weaker institutional capacity, targeted pilots can validate reforms at a smaller scale before broader rollout. Therefore, a thoughtful combination of CPBF, RBF and IPF can turn policy ambition into tangible investment results, even in challenging contexts.
To make this approach work in practice, AIIB and our partners will focus on several priorities:
- Deep diagnostics: Working with members to identify not just what policies should change but also what outcomes will attract private investors.
- Innovative design: Disbursement-linked indicators that emphasize market outcomes over procedural milestones.
- Selective piloting: Identifying members with strong government commitment and favorable conditions for a blended CPBF/RBF approach.
- Linking to projects: Ensuring that downstream projects benefit from the enabling policy environment.
By thoughtfully blending reform-driven agenda with results-focused instruments, we can accelerate climate action, convert policy ambitions into bankable projects and mobilize private capital in support of sustainable development.
