To help develop infrastructure as an asset class through the creation of debt securities for sale to institutional investors.
AIIB has invested in a new platform business – Bayfront Infrastructure Management Pte. Ltd. (Bayfront, or the Platform) that purchases infrastructure debts from financial institutions and distributes them to institutional investors through securitization or other formats. This supports private capital mobilization and builds infrastructure as an asset class. The purchase of such debts is predicated on the hypothesis that financial institutions that currently originate and hold such debts to maturity will increasingly be constrained from doing so with the advent of Basel lll regulations.
The Project resulted in the establishment of a platform to purchase infrastructure debts from financial institutions, structure and distribute them to institutional investors through securitization or other distribution formats. In line with previous capital markets projects executed by AIIB, this platform has developed and maintains an appropriate environmental and social (“E&S”) framework. A summary of the framework can be found here.
In place of AIIB’s Environmental and Social Policy (“ESP”), the project team has required that the Platform put in place a robust E&S framework integrated with its due diligence process before any loan acquisition and through its asset management phase. The Framework entails screening debts against the Environmental and Social Exclusion List and other eligibility criteria, reviewing their original E&S categorization, available environmental and social assessment and monitoring documentation, and relevant loan covenants. An E&S risk rating is then attributed to all debts reflecting the original E&S categorization, E&S performance to date and the Platform’s exposure to residual E&S risks. The findings of this due diligence are discussed at the Platform’s Executive Committee or Board prior to making an investment decision. Debts are thereafter monitored for their E&S performance and controversies. The Platform provides to its shareholder AIIB regular insights into the E&S performance of the portfolio and E&S characteristics of the pipeline. The E&S framework was expanded to include not only project finance debts to single assets but also corporate debts.
The rationale for the proposed approach is as follow: