AIIB, Amundi launch green investment framework

by SHAHEERA AZNAM SHAH / pic by BLOOMBERG

THE Asian Infrastructure Investment Bank (AIIB) and Amundi have launched the AIIB-Amundi Climate Change Investment Framework — a platform to assess climate change risks and opportunities that are aligned with objectives of the Paris Agreement.

In a joint statement yesterday, AIIB and Amundi said the investment framework translates the three key objectives of the Paris Agreement into fundamental metrics, equipping investors with a new tool to assess an issuer’s level of alignment with climate change mitigation.

“The global climate challenge is a huge threat to our world and urgent multilateral action is needed to address this crisis and help our members meet their commitments to the Paris Agreement,” said AIIB president and chairman of the board of directors Jin Liqun (picture).

He added that the framework signals the financial institution’s commitment to playing an important role in battling climate change by strengthening market capacity and driving the green agenda in Asia.

The parties said the framework embarks on a holistic approach which the current private-capital mobilisation efforts often lack.

“Equity capital markets currently focus on thematic funds and commonly face strong sector bias, while low-carbon indexes have a pronounced focus on mitigation efforts.

“In fixed income, green bonds have been the main climate finance solution for debt capital markets, but they do not consider exposure to climate investment risks and opportunities from the viewpoint of an issuer’s entire balance sheet,” the statement read.

AIIB and Amundi noted that investors can expect portfolios aligned with the framework to deliver a potential financial impact by benefitting from any future repricing of climate change risks and opportunities in the capital market.

“The framework allows investors to measure issuer performance against the three objectives of the Paris Agreement.

“This allows investors to systematically include A-list issuers, those that are already performing well on all three objectives, and B-list issuers, those that are moving in the right direction but are not A-list issuers yet, into their investment portfolio,” the statement read.

AIIB and Amundi said an investment strategy targeting both A- and B-List issuers should be more resilient to climate change risk and more exposed to opportunities not yet priced in by the market.

“The framework also delivers extra financial impact as it is designed to encourage the integration of climate change risks and opportunities into business practices by targeting the engagement of so-called ‘B-List’ issuers to help them transition to ‘A-List’ credentials,” both parties said in the statement.

In 2019, AIIB’s climate finance amounted to US$1.7 billion (RM7.07 billion) or 39% of total financing approved, an increase from US$2.5 billion or 35% of total financing approved between 2016 and 2018.

The bank also launched a US$500 million fund through the AIIB Asia Climate Bond Portfolio in 2019 to accelerate its members’ climate action, catalyse emerging-market investment and address the underdeveloped climate-aligned bond market.

Amundi, Europe’s largest asset manager, has been at the forefront of climate finance development, creating innovative solutions to bring new large-scale funding dedicated to financing the low-carbon economy across asset classes and geographies.

As of June 2020, climate finance solutions represented €19 billion (RM93.67 billion) in assets under management.