The Asian Infrastructure Investment Bank (AIIB) has successfully priced its first Climate Adaptation Bond, a thematic bond issued under the AIIB Sustainable Development Bond Framework. The 5-year bond raised AUD500 million, and the proceeds will be allocated to projects that have an estimated climate adaptation finance portion of 20 percent or greater of the total project financing.
The purpose of the Climate Adaptation Bond is to raise awareness about climate-resilient and adaptive infrastructure investments. In 2015, the Paris Agreement established the global goal of adaptation and AIIB has committed to be fully aligned with the Paris Agreement by July 1, 2023. Climate adaptation financing is about investing now to make infrastructure assets more resilient so that as the effects of climate change intensify, infrastructure is able to protect vulnerable communities in the long-term.
Asia, as a region, is already experiencing the effects of climate change. In the past 20 years, Asia has six of the top 10 countries globally worst affected by climate-related disasters. Increasingly, AIIB’s members are paying more attention to the impact of climate change and the need for resilient infrastructure. With this Climate Adaptation Bond, AIIB fulfilled its commitment at COP27 in Sharm El Sheikh to issue a bond focusing on climate resilience and has successfully engaged investors in mobilizing finance for climate adaptation, which is critical to achieve the necessary scale of investment required to support vulnerable members in the region.
AIIB’s definition of climate adaptation is based on the harmonized principles from the multilateral development banks’ Joint Methodology for Tracking Adaptation Finance, and the Common Principles for Climate Change Adaptation Finance Tracking. Examples of adaptation projects eligible for allocation under the AIIB Climate Adaptation bond include the Punjab Municipal Services Improvement Project and the Henan Flood Emergency Rehabilitation and Recovery Project.
AIIB has a target to reach 50 percent climate finance by 2025, which in 2022 the Bank exceeded by approving 56 percent, or USD2.39 billion, in climate finance (including both climate mitigation and adaptation)[1]. By 2030, AIIB expects that its cumulative climate finance will reach USD50 billion. AIIB’s investments in climate adaptation finance is comprised of projects in water, urban development, transportation and energy, including stand-alone projects, co-financed projects, and sub-components of projects.
“AIIB is committed to fund infrastructure investments that promote climate adaptation. This can be seen in our growing pipeline of climate adaptation projects, currently estimated to be approximately USD1.5 billion. This bond contributes to AIIB’s targets of increasing financing for adaptation from capital markets, delivers on our commitment made at COP27 to promote climate-resilient solutions through issuance of bonds, and shows our strong focus of making all our infrastructure investments climate resilient,” said Sir Danny Alexander, AIIB Vice President for Strategy and Policy.
According to AIIB Treasurer Domenico Nardelli, “We are happy to be back in the Australian dollar market for the third time since 2021. Australia was one of the first domestic markets that the Bank strategically targeted and we are happy to maintain a continued presence there. It is a great milestone for AIIB to issue a Climate Adaptation Bond to highlight the critical importance of climate adaptation in financing a sustainable future for Asia and beyond.”
Key Transaction Terms:
|
Issuer |
Asian Infrastructure Investment Bank (AIIB) |
|
Issuer Rating |
Aaa / AAA / AAA (Moody’s / S&P / Fitch) |
|
Size |
AUD500 million |
|
Announcement Date |
May 9, 2023 |
|
Pricing Date |
May 10, 2023 |
|
Settlement Date |
May 17, 2023 |
|
Maturity Date |
May 17, 2028 |
|
Re-offer Spread |
ASW+58bps |
|
Re-offer Price / Yield |
99.574%/ 4.095% |
|
Joint Lead Managers |
Commonwealth Bank of Australia, Deutsche Bank AG Sydney Branch, J.P. Morgan Securities Australia Limited, The Toronto-Dominion Bank, London |
Investor Distribution
|
By Geography |
% |
By Investor Type |
% |
|
Americas |
3 |
Central Bank / Official Institution |
53 |
|
EMEA |
20 |
Banks |
27 |
|
APAC |
77 |
Asset Manager |
20 |
About AIIB
The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank whose mission is financing the Infrastructure for Tomorrow—infrastructure with sustainability at its core. We began operations in Beijing in January 2016 and have since grown to 106 approved members worldwide. We are capitalized at USD100 billion and Triple-A-rated by the major international credit rating agencies. Collaborating with partners, AIIB meets clients’ needs by unlocking new capital and investing in infrastructure that is green, technology-enabled and promotes regional connectivity.
[1] AIIB calculated its 2022 climate financing share excluding financing approved through the COVID-19 Crisis Recovery Facility.
