The Asian Infrastructure Investment Bank (AIIB) has approved $500 million for a managed credit portfolio that aims to develop infrastructure as an asset class, develop debt capital markets for infrastructure and promote the integration of Environmental, Social and Governance (ESG) principles in fixed-income investments in Emerging Asia.
Focused on infrastructure-related bonds as an asset class, the AIIB Asia ESG Enhanced Credit Managed Portfolio will be comprised of corporate bonds issued by infrastructure-related issuers, including quasi-sovereign bonds and green bonds where proceeds are directed to sustainable infrastructure and other productive sectors.
The AIIB Asia ESG Enhanced Credit Managed Portfolio will also include a strong ESG component. Bonds purchased under this portfolio will be screened, assessed and managed based on ESG investing principles that have been informed by AIIB’s Environmental and Social Framework.
“We can unlock the greatest potential to mobilize private capital for infrastructure from institutional investors by developing infrastructure as an asset class and deepening the sustainable debt capital market in Asia,” said AIIB vice president and CIO D. J. Pandian. “Integrating ESG standards into capital markets in Emerging Asia will help build capacity for and interest in responsible investing.”
“If only a small fraction of the trillions of dollars currently under management by institutional investors were allocated to infrastructure projects, there would be a catalyzing impact on Emerging Asia’s growth potential,” said AIIB director general for investment operations Dong-Ik Lee. “By setting up this portfolio, we hope to develop a proof of concept that over time will mobilize other like-minded investors to join us in cultivating an ESG market in Asia.”
At the outset, AIIB will deploy its own capital as it builds awareness for the benefits of ESG investing in Asia. Over time, it will support other investors to set up similar platforms or participate in AIIB initiatives, with the ultimate goal of establishing a robust ESG market in the region.