Integration of climate mitigation and resilience in key sectoral strategies

Explanation

Energy

On energy, in its strategy AIIB acknowledges the importance of reducing greenhouse gas emissions, and the strategy focuses on “projects in renewable energy, energy efficiency, rehabilitation and upgrading of existing plants, and transmission and distribution networks”. The support to countries is to be aligned with the country’s national energy plans and NDCs. However, as some countries’ NDCs are not currently Paris aligned, there is room for more commitment to climate mitigation and encouraging further ambition of NDCs.

The AIIB seems to prioritize energy access over decarbonization of the energy system, rather than thinking these issues together. The strategy states: ” According to the International Energy Agency, achieving universal electricity access for basic human needs by 2030 would increase global greenhouse gas emissions by just 1.3 percent.” This is further reiterated by AIIB’s statement to “support  and accelerate  its  members’ respective  transitions  toward  a  low-carbon  energy  mix  through investments in RE and reduction of carbon emissions from fossil fuels.” The strategy further specifies that “carbon efficient oil-and coal-fired power plants would be considered if they replace existing less efficient capacity or are essential to the reliability and integrity of the system, or if no viable or affordable alternative exists in specific cases.” The strategy is also explicit on the Bank’s engagement in mid-stream oil and gas investment, stating that it “will support such investments provided that they improve energy security or promote regional integration and trade.” There is no official exclusion of fossil fuel investment for the Bank and the strategy leaves relatively large room for manoeuvre. Members of the AIIB management have made statements indicating that the Bank will not support coal power plants (see AIIB section of chapter on Fossil Fuel Exclusion Policies for more detail) – although this has not yet been officially integrated in the energy sector strategy. Overall, this cannot be considered Paris aligned.

As regards climate risk, the energy strategy states that “climate risks will be evaluated and mitigation and adaptation measures developed where appropriate”, which shows that this aspect has been integrated into the strategy. “Asia will face higher risks if climate threats are not mitigated … environmental and social risks and impacts continue to be an important issue in the planning, implementation and operation of energy infrastructure”. The energy strategy also recognises the specific challenge of financial intermediaries, and states that “attention will be paid to their capacity for environmental and social management and careful screening of subprojects”. It is unclear in how far that includes climate risk screening.

Transport

The transport strategy includes the three-step approach “avoid-shift-improve” to refer to mitigating actions from GHG emissions in the sector. It is unclear in how far this approach is considered only as one possible angle to engage with the transport sector and climate change plays only a small role in the overall strategic direction. The strategy mentions that for “upper, middle and high-income countries where basic transport provision has been met, projects financed by AIIB will come with additional focuses on spreading green transport technologies and uplifting transport productivity”. This in turn leaves it unclear whether green technology is going to be implemented within the design of projects for places where basic transport has not been met. There is very little reference to climate risk or resilience in the strategy, as well as only a vague paragraph on adaptation. Despite being from 2018 and given the great importance that the transport sector will have in the path toward a net-zero world, the strategy is not linked to the Paris Agreement.

Water

The AIIB’s strategy recognizes the importance of having an inter-sectoral water strategy that is mindful of untreated wastewater’s impact on ecosystems. Sector analysis puts an emphasis on the connection between water and sustainable city strategies. The strategy also acknowledges adverse effects of climate change and Asia’s particular vulnerability to impacts on natural water cycles. The Bank has segregated water strategy into three “investment focuses” where it will support its members’ investments and support:

• Water Services covers distribution and access of water and accompanying infrastructure
• Resource Management covers water quality, recycling and conservation
• Resilience covers institutional and system preparation and recovery from water-based disasters

AIIB states  “Innovations in green technology and nature-based solutions have a significant role in improving the positive impact of water investments”. The Strategy includes hydropower, improved efficiency and water for energy specifically in cooling.

The strategy refers to the issue of wastewater treatment, but there does not appear to be any specific mention of climate mitigation and how this can be supported through water-related investments. Note that the role of water in mitigating climate change is acknowledged in the sustainable cities strategy. There seems to be a misalignment between the two strategies.

Cities

The AIIB has a sustainable cities strategy. It recognises the need to put the growth of Asian cities in the context of climate change and includes climate mitigation and resilience as one of the goals of sustainable cities. Mitigation is mentioned as relevant in the urban context in the sectors energy efficiency, water supply, public housing and spaces and electricity distribution, transport is considered under low-carbon infrastructure. The strategy defines resilience as the “ability to withstand both sudden shocks (e.g. natural disasters) and slow-onset impacts (e.g. through climate adaptation)”. The strategy briefly refers to the Paris agreement.

Water supply and sewage systems are covered in this strategy, and there is a reference to the use of nature based solutions in this sector.

Annex:

Digital

AIIB’s strategy on digital infrastructure recognizes the importance of the sector’s interdependence with others (energy, water, transport and cities) and as an opportunity for global growth and closing the inequality gap. The document states that a strong digital infrastructure is in line with the AIIB’s mandate  (sustainable economic development and regional connectivity) as well as the AIIB’s core values (“lean, clean and green”) due to the sector’s relatively low carbon footprint and applications to advance renewables and efficiency. Measures include soft infrastructure such as smart grids and smart meters “to increase efficiency and sustainability”, as well as various hard infrastructure policies. The strategy recognizes environmental risks of digital infrastructure (improper disposal of towers, cables, devices and higher electricity consumption) and suggests possible paths to regulation including an in-house body to oversee various countries and developing strategic partnerships.