The Asian Infrastructure Investment Bank turns eight years of age next January, making it the world’s youngest multilateral development bank.
One of the first faces through the door in January 2016 was Sir Danny Alexander, former chief secretary to the UK Treasury and, today, the AIIB’s vice-president of policy and strategy.
Asked to identify any mistakes the bank was keen to avoid from day one, Alexander pauses for thought. “In the design of AIIB, a lot of learning came from studying the charters and articles of agreements of other MDBs,” he replies. “We had the opportunity to learn [from them]. So although we spring from the same DNA pool as other MDBs in terms of our governance standards, there are certain differences.
“We have a non-resident board, which is much more focused on strategic and policy direction at the bank, and on holding management accountable. That’s something we’ve enhanced as we’ve developed our accountability framework.”
A key focus of the AIIB — it’s right there in its name — is infrastructure. When it’s suggested that global policymakers stopped discussing the subject when Covid hit, Alexander pushes back.
“People may have stopped talking about it, but they haven’t stopped needing it,” he says. “When we talk to our members, so many of their priorities are guided by it. We need to think about what kind of infrastructure the developing world needs over coming decades.”
He points to the example of good digital connectivity. “One of the things the pandemic put into focus was that societies with high quality digital infrastructure were better able to deal with the ensuing economic consequences. Investing to tackle the global digital divide — that involves infrastructure and that is key.”
Alexander also points to the Pandemic Fund, funded by $1.6bn in commitments from 25 founding donors, including the AIIB. “It’s a new international initiative to enhance pandemic preparedness. Some of that work involves health infrastructure. We decided it was a sector we want to invest in, precisely because it’s part of what’s really needed.”
Another key commitment the bank made from day one was to sustainability. Last month, it launched its Climate Action Plan, a push to channel at least 50% of its annual funding commitments to projects that mitigate climate change by 2025. In May, it issued its first climate adaptation bond, a five year that raised A$500m ($316m).
“We are embracing our role as an agent of change to drive forward climate transition in Asia,” Alexander says. “There’s a hugely important conversation going on, including in Marrakech, about how we scale up climate finance to achieve the goals of the Paris Agreement.”
A key part of that involves financing the long term transition to low carbon power generation.
“Climate adaptation,” Alexander adds, “is about infrastructure: how we build roads, railways, buildings to be as resilient as possible to the effects of climate change.”
Asked for the biggest challenge MDBs face going forward, he widens his lens.
“The world rightly expects us to play a crucial role in delivering finance and mobilising the private sector, but at a scale needed to meet the climate challenge. It will require a massive shift in scaling up, and in rethinking how we work together and individually.
“And that challenge cannot wait. It must be done in the next several years. It requires [action from] shareholders — countries — and MBDs. We need to rise to the challenge, and we need the institutions we collectively own to do so. It’s a sign of hope and a call to action, and we take it very seriously.”