Standalone climate strategy and integration of climate in overarching strategy

Overarching strategy

The AIIB’s Corporate Strategy 2021–2030 sets out the Bank’s commitment to be “lean, clean and green”. In this vein, one of the Bank’s four thematic priorities is Green Infrastructure, which both supports climate change efforts and assists members in achieving their other environmental and related development goals, including their Nationally Determined Contributions (NDCs). The headline climate commitment of the Bank’s Corporate Strategy is the goal to achieve a 50% share of climate finance (to contribute to climate mitigation and/or adaptation) in AIIB approvals by 2025.[1] In outlining its support for green infrastructure, the AIIB further commits to mainstreaming climate change priorities into decision making across its operations, including through the use of relevant tools (e.g., shadow carbon pricing and greenhouse gas (GHG) emission accounting) to inform the economic analysis of projects.[2] However, the strategy does not elaborate concrete targets or a detailed roadmap for how the AIIB will deliver on its commitment to increase its support for green infrastructure. While the Corporate Strategy makes high-level reference to the AIIB’s commitment to support the Paris Agreement (in the context of green infrastructure financing), it does not explicitly address the full extent of the Bank’s commitment to Paris alignment. In particular, the Bank’s time-bound commitment to align new financing does not feature. Moreover, while there is reference to alignment with the Joint MDB Framework (which the Corporate Strategy predates), full institutional alignment (covering the full six building blocks of the joint MDB approach) is not comprehensively considered. There is no statement of a minimum principle to “do no harm”.

During 2025, the Bank is undertaking a midterm review of the Corporate Strategy to take stock of progress, and highlight areas of possible improvement. As part of this process, the Complaints-resolution, Evaluation, and Integrity Unit (CEIU) of the Bank has undertaken an “independent” assessment for the Board of Directors and Bank management. This assessment includes valuable recommendations regarding adding outcome indicators to the corporate scorecard, and paying increased attention to environmental and social standards in financial intermediaries’ investments. However, it does not address other fundamental omissions from the corporate strategy, such as the lack of references to the AIIB’s commitment to alignment with the Paris Agreement, or the “do no harm” principle.[3]

Standalone climate strategy

The AIIB’s 2023 Climate Action Plan (CAP) acknowledges Asia’s contribution to climate change and highlights the critical role MDBs play in addressing the climate crisis. It emphasises MDBs’ unique ability to foster Paris Agreement ambition through risk absorption, climate financing, private sector mobilisation, resource allocation to less developed nations, and driving innovative global solutions. The AIIB aims to build on these contributions and “lead by example”, underscoring its commitment to advancing climate action and supporting sustainable development across its operations.

The CAP is grounded in four guiding principles, which notably include the AIIB supporting “differentiated and tailored solutions” adapted to client needs and circumstances, as well as an emphasis that climate solutions “must account for the rights and needs of less developed countries to focus on socioeconomic development”.

The CAP highlights the AIIB’s approach to climate change mitigation, addressing priorities such as reversing forest loss and meeting global mitigation goals through nature based solutions and increased private sector financing. It also discusses the AIIB’s approach to the energy sector (set out in full in its Energy Sector Strategy (ESS)) emphasising the prioritisation of increasing overall energy access among its members. Support for member states transitioning to clean energy is framed as secondary, contingent on this overarching focus on expanding energy access.

Effectively balancing the prioritisation of energy access with the imperative of the energy transition relies on a robust transition framework being in place to guard against contributing to carbon lock-in and stranded asset risk. As a result, the absence of an overarching strategic commitment by the AIIB to “do no harm” (or ideally to “do good beyond do no harm”) is particularly significant. The CAP also misses the opportunity to explicitly restate the importance that increased energy access in emerging economies must be for all, as set out by SDG 7 and notably alluded to by the Bank’s own ESS (through a specific commitment to supporting access for poor and underserved communities). This is relevant due to evidence that past projects funded by the AIIB with a focus on increasing energy access in emerging economies have not led to energy access in local villages that were impacted.

Specifically on climate change adaptation, the CAP emphasises the AIIB’s role in relation to its infrastructure financing mandate and the critical need to both adapt existing infrastructure and ensure new infrastructure is adaptive and resilient. Accordingly, it highlights the long-term value of financing adaptation measures and deploying concessional financing to achieve this. The CAP also mentions that the AIIB will consider developing new policy-based financing instruments to financially support members in strengthening their national policy frameworks to enable adaptation financing. However, it stops short of suggesting the AIIB can also play a technical capacity building role in supporting government and subnational entities in this respect, in light of the Bank not having a technical assistance offering.

In terms of results targeting, monitoring and reporting, the CAP aggregates information on current efforts, but does not set forth any new time-bound granular targets to verify delivery of the Bank’s mitigation and adaptation efforts. This falls short of best practice among peer institutions, such as the Intra-American Development Bank (IDB), the African Development Bank (AfDB) and the World Bank Group (WBG), in developing a public results framework tracking progress on established strategic priorities. Such frameworks serve to both enable more comprehensive monitoring of progress and to increase accountability.

Prior to issuing its first CAP, the AIIB made a commitment in 2021 to align all new operations with the goals of the Paris Agreement by July 1, 2023. As part of this commitment, the Bank also pledged to publish a Paris Alignment Methodology, guided by the Joint MDB methodological framework, which it delivered by the same deadline.

The resultant AIIB Paris Agreement Alignment (PAA) Methodology focuses on two of the six building blocks (BB) included in the Joint MDB Framework: BB1 (aligning with mitigation goals) and BB2 (aligning with climate adaptation and resilience goals). The Bank has developed ancillary resources (such as a climate sensitivity matrix and questionnaire for financial intermediaries) to facilitate assessment of alignment with BB1 and BB2. It also provides sector-specific guidance for BB1 assessments (see Annex 2), drawing on key AIIB strategic documents such as the Energy Sector Strategy and Environmental and Social Framework. Notable aspects of the AIIB PAA methodology include:

1. NDCs (and LTSs) are at the core of verifying Paris alignment: The methodology relies on a given country’s NDC and/or LTS as the basis for assessing alignment.
2. Projects are also screened for compatibility with a low-carbon pathway (LCP): This LCP test relies on existing country-specific LCPs in the first instance. In case country-specific LCPs are not available, the AIIB will consider regional or global low-carbon pathway analysis “carried out by reputable institutions”.^[4] In setting out these provisions, the Bank acknowledges that official country-specific LCPs are currently still quite limited. As a result, regional or global low-carbon pathway analyses will likely be often used instead. Relying on deductions from these aggregated pathways can lead to inconsistencies in the robustness of the reference scenarios against which the AIIB screens its projects. The AIIB also does not explicitly detail what minimum requirements the Bank has for the LCPs used, e.g., whether they are aligned with a 1.5 °C or 2 °C scenario.
3. Fossil fuel operations can be considered Paris aligned:[5] If, for example, a country’s NDC and LTS are not explicit about the role of gas/gas-fired power, a project may still be considered Paris aligned if the project’s emissions level can be offset by the “transitional value” it offers. To illustrate this, the AIIB provides the example that financing a gas-fired power plant might advance a country’s energy transition by enabling a higher penetration of variable renewable energy sources through the flexible output it offers.[6]Moreover, the PAA methodology also states that the AIIB would deem oil projects Paris aligned under exceptional circumstances.[7]  
4. Option for employing either a transaction-based or counterparty-based approach for financial intermediary (FI) operations: The methodology does not require all FIs to be Paris aligned at the counterparty level for the AIIB to invest. FI clients may be asked to commit to a Paris Alignment Action Plan (PAAP) if: (1) use of proceeds is not known at the agreement stage; (2) the AIIB determines that the FI client is highly exposed to physical and/or transition climate risks; and (3) the FI does not have an adequate climate risk management system. The methodology lacks mandatory, universal minimum criteria for PAAPs, instead offering illustrative examples. This absence of specific requirements can lead to variation in the content and rigour of PAAPs among FIs, with no clear indication of how the AIIB will assess their adequacy or ensure consistency.

Recommendations: 

• The AIIB should bridge the gap between its Paris Agreement mandate and the absence of alignment requirements for financial intermediaries (FIs). A phased alignment approach for direct and indirect operations is essential, with time-bound targets and standardised Paris Alignment Action Plans (PAAPs) for all non-aligned FIs. These plans should include clear criteria, reporting requirements, and interim measures to extend Paris alignment methodology to FI subprojects, ensuring consistent standards and alignment across all AIIB-financed transactions.
• The AIIB should explicitly incorporate a “do no harm” principle into both its overarching and climate strategies, ensuring that all projects avoid adverse social, environmental, and ecological impacts. In line with best practices from peer institutions like the IDB, AIIB should also consider adopting a “do good beyond do no harm” approach.[8] The midterm review of the AIIB’s Corporate Strategy should reinforce this commitment and include measurable indicators, strengthened climate risk assessments, and enhanced transparency to demonstrate accountability and alignment with the Paris Agreement’s goals of limiting global temperature rise and supporting low-carbon, climate-resilient development.
• The AIIB should revise its CAP to include explicit, time-bound targets for emissions reduction, adaptation finance, and overall climate finance, with a clear roadmap for achieving 100% Paris alignment across all operations, including those through financial intermediaries. The revised CAP should aim to include a results framework for tracking progress achieved in relation to established strategic priorities. The AIIB could refer to those developed by peer institutions such as the IDB, the AfDB or the WBG.
• The AIIB should consider standardising their screening of projects for compatibility with LCPs. This could be achieved by establishing a set of minimum criteria for the granularity and ambition level of an LCP to be considered a sufficiently robust benchmarking pathway, and/or leveraging a consistent source of existing analysis, such as the World Bank’s Country Climate and Development Reports (CCDRs).

[1] For further details, see the “Non-fossil to fossil energy ratios and climate finance” metric.

[2] For further analysis of the AIIB’s use of these tools, see the “Greenhouse gas accounting and reduction” and “Shadow carbon pricing” metrics.

[3] E3G will update this part of the assessment once the full midterm review of the Bank’s Corporate Strategy is published.

[4] The Bank does not provide specific examples of the regional or global low-carbon pathway analyses from “reputable institutions” it considers.

[5] For full coverage of the AIIB’s approach to fossil fuel financing, see the “fossil fuel exclusion policies” metric.

[6] The AIIB rightfully recognises that the design and contractual arrangement of a given gas power plant would have to be conducive to it fulfilling this function.

[7] For example, the AIIB can support oil sector investments on an island or in the context of temporary disaster response, and when it can be demonstrated that a fully renewable option is not feasible.

[8] Noting that this currently only features in the IDB’s Environmental and Social Policy Framework, rather than its climate or overarching strategy.