Technical assistance for implementing Paris goals

Policy level, climate-related technical assistance

The AIIB’s Climate Action Plan (CAP) states that the Bank will support “efforts to accelerate the development and adoption of climate-positive policies to underpin the implementation of effective climate actions”. To that end, the Bank states it is considering deploying new policy-based financing instruments. First steps have been taken with the approval of a Climate-Focused Policy Based Financing (CPBF) instrument in 2024. While this is primarily focused on providing financial (as opposed to technical) support, the Bank does state it will engage in upstream dialogue with countries, aiming to draw on its climate finance and infrastructure expertise to add value to the policy programmes supported.   

The AIIB is not part of the NDC Partnership, nor does it have any specific programmes or initiatives to support member states’ NDCs (at either the implementation or ambition level).[1] During UNFCCC COP29 in Baku, the AIIB and fellow MDBs announced the implementation phase of the MDBs’ Long-Term Strategies Program (LTS-P). This initiative will support countries’ development of Long-Term Strategies as an extension of their NDCs, and coordinate the MDBs’ efforts in this field.

In 2022, the Bank joined the Coalition for Climate Resilient Investment (CCRI), which was intended to support policymakers and investors to better understand and manage climate risks, but is no longer operational. No further details regarding the AIIB’s involvement in this coalition have at any point been publicised. However, discussions with the AIIB have suggested that its work as part of the CCRI has since continued under the auspices of the Institutional Investors Group on Climate Change (IIGCC), with which it is facilitating a case study on the initiative’s physical climate risk assessment methodology.  

Fossil fuel subsidy reform

The AIIB’s Energy Sector Strategy acknowledges the need to phase out fossil fuel subsidies. However, there is no evidence that the AIIB has undertaken dedicated work to accelerate or support the phase-out of fossil fuel subsidies in any member states or regions.

Fossil fuel subsidies by governments have been shown to have a combination of harmful impacts as they distort energy markets, lock in carbon-intensive infrastructure, and increase the risk of stranded assets. Broader research has highlighted their contribution to global climate risks and economic inefficiencies – issues particularly pressing in Asia, where energy demand is rapidly increasing. The AIIB’s focus on infrastructure uniquely positions it to offer vital expertise in helping countries phase out existing fossil fuel infrastructure in favour of clean alternatives. Failing to engage with member countries on this topic therefore represents a significant missed opportunity for the AIIB to develop a workstream in an area closely related to its specific mandate and with potentially high cross-cutting positive impact.  

Other technical assistance

Public calls for the AIIB to expand its non-lending services, including technical assistance (TA), have been growing. There is some evidence of relevant non-policy-focused, climate-related TA initiatives by the AIIB. Notable efforts in this regard include:

• Managing the Project Preparation Special Fund (PPSF): a multi-donor facility created to provide TA grants to AIIB members to prepare bankable projects. As of September 2024, 27 of the 28 PPSF-supported projects featured climate financing components.
• Launching AIIB+, a digital solutions platform, during the 2024 Annual Meetings: for projects to be matched with external concessional and technical resources. However, as this platform is very new, it is not yet clear to what extent it will contribute to climate-related projects.

Notwithstanding these examples, there remains limited evidence of the AIIB undertaking dedicated climate-related TA initiatives. There remains scope for the Bank to expand its capacity building engagement with clients to enhance and sustain its impact across its areas of operation.

Recommendations:

• The AIIB should enhance its approach to supporting NDCs, through building on existing efforts from MDBs and the PDB ecosystem. This could involve the AIIB complementing other MDBs’ NDC support through developing a targeted approach that draws on its comparative advantages in infrastructure finance, while also joining platforms like the NDC Partnership to ensure coordinated action. First steps in this regard are already taking shape with the AIIB’s implementation of the MDBs’ LTS Program. More common action can enable the Bank to fulfil the commitments of its CAP through offering technical and financial support, as well as policy-based financing, to support infrastructure development that advances NDC implementation. A truly Paris aligned approach in this regard would involve the Bank engaging with member countries to support the raising of NDC ambition, in line with the goals of the Paris Agreement.
• Providing TA for fossil fuel expansion risks undermining climate goals through contributing to locking in emissive, stranded assets and diverting scarce resources from the transition to clean energy. Therefore, the AIIB should consider phasing out all TA for fossil fuel expansion (not including any TA that is specifically supporting the energy transition), as part of aligning its TA exclusions with those on fossil finance.[2] Instead the Bank may consider focusing more strongly on green infrastructure, e.g. as a thematic focus under the Multilateral Cooperation Centre for Development Finance (MCDF). Any exceptions for circumstances where TA for fossil fuel projects is considered permissible must be strictly defined, as part of a clearly defined decision making process requiring establishing a clear rationale for its necessity in a given context, and consideration of clean energy alternatives.
• The AIIB should consider developing a dedicated TA programme to support fossil fuel subsidy reform in its member states, given the strong rationale and potential impact of such a programme, as well as its relevance to the Bank’s mandate. Leveraging its infrastructure expertise, the AIIB could play a pivotal role in helping countries phase out subsidies for and retire (or where possible, repurpose) existing fossil fuel infrastructure. This could support member countries with meeting their just transition objectives through freeing up existing streams of public finance.

[1] Notably, the AIIB’s Paris Alignment Approach (PAA) requires all projects to align with NDCs, meaning the Bank is effectively supporting their implementation on a project-by-project basis, if not through a dedicated initiative. Nonetheless, this is not interchangeable with targeted approaches for proactively advancing NDC implementation and ambition-raising.

[2] See the “Fossil fuel exclusion” metric for further details on how the AIIB’s fossil fuel financing exclusions could also be strengthened.