To (i) enable investments into green infrastructure in emerging Asia, and (ii) pioneer the innovative sustainability-linked incentive scheme to promote climate finance, gender diversity and ESG governance in the private equity fund industry.
CEL Infrastructure Investment Fund II (the Fund, EIIF II) is a closed-end infrastructure investment fund domiciled in Hong Kong, China with a target size of USD600 million and a target first closing date by 3Q 2022. The Fund seeks to acquire control or significant minority equity stakes in both greenfield and brownfield infrastructure assets. Target sectors include mainly renewable energy and waste to energy, logistics, digital infrastructure and transport infrastructure. The Fund will primarily invest in Southeast Asia including Indonesia, Malaysia, Philippines, Singapore, Thailand, and Viet Nam, with some exposure to China and Hong Kong, China.
AIIB’s Environmental and Social Policy (ESP), including the Environmental and Social Exclusion List (ESEL) and Environmental and Social Standards (ESSs), is applicable to this Project. The Project is categorized as a Financial Intermediary (FI) operation, as the financing structure involves the investment of funds in EIIF II for onward investment in sub-projects that meet eligibility criteria to be agreed with AIIB. This will include the selection, appraisal, approval and monitoring of sub-projects in accordance with AIIB’s ESP requirements. The E&S instrument will be EIIF II’s ESMS which is enhanced and materially consistent with AIIB’s ESP.
The pipeline comprises of sub-projects across four infrastructure sub-sectors: renewable energy, waste-to-energy, telecom/digital and logistics. It will be a mix of greenfield and brownfield assets primarily located in Indonesia, Viet Nam and Thailand. Every sub-project will be screened to identify the risks and following the assessment, appropriate mitigation measures will be adopted.
AIIB will conduct prior review of the first three sub-projects and Higher Risk sub-projects – all Category A and selected Category B sub-projects to facilitate EIIF II’s compliance with AIIB’s E&S requirements. EIIF II will engage independent and qualified E&S consultants for all Higher Risk sub-projects. Activities included in AIIB’s ESEL will not be eligible for financing. Coal mining, coal transportation and coal-fired power plants, as well as infrastructure services exclusively dedicated to support any of these activities and gas-related sub-projects will also be excluded. EIIF II will exclude any sub-project that triggers ESS 3 Indigenous Peoples. A maximum of three Category A sub-projects can be funded under this Project.
EIIF II has published on its fund website a summarized version of its enhanced ESMS. The name, location and sectors of the sub-projects, will be disclosed within 12 months following financial close. For Category A sub-projects, EIIF II will be required to publish draft E&S documentation at least 60 calendar days in advance, prior approval to investing. For all Higher Risk sub-projects, EIIF II will be required to disclose annual E&S documentation during the preceding 12 months, unless such disclosure is subject to the host country’s regulatory requirements, market sensitivities or consent of the sponsor. E&S documentation will be written in local language(s) and at least a summarized version in English and be disclosed timely on the websites of EIIF II or the sub-project concerned in an appropriate manner.
During project implementation, AIIB will require submission of semi-annual E&S monitoring reports from the Fund in an agreed format providing an update on the implementation of the enhanced ESMS, and a summary of the E&S performance of each sub-project. AIIB will conduct its regular supervision including site visits and detailed review of the E&S documentation of selected sub-projects.
EIIF II has enhanced its External Communications Mechanism (ECM), including contacts and processes to receive and handle E&S related matters. In addition, EIIF II will require the sub-projects to establish Grievance Redress Mechanism (GRMs) to receive and facilitate resolution of the concerns and complaints of people including contracted project workers who believe they may be or have been adversely impacted by the Project. The ECM and established GRMs at the subproject-level will be made available to all stakeholders concerned and will provide information in local language(s), in an appropriate manner and regarding AIIB’s Project-Affected People’s Mechanism (PPM).