Asian Infrastructure Investment Bank: How lean, clean, and green is the AIIB?

In 2013, China proposed to establish the Asian Infrastructure Investment Bank (AIIB) as a new source of infrastructure financing in Asia. Like the China-led Belt and Road Initiative, the AIIB reflects the emergence of China's new, much more assertive foreign policy posture. The AIIB opened for business in 2016 shortly after the signature of the Paris Agreement, with the pledge to be 'lean, clean and green'. Notably the United States (US) perceived the bank as a game-changer for established multilateral development banks (MDBs) and the global financial architecture. Despite pressure from the US, most of its allies − except Japan − joined the AIIB, arguing that shaping the bank's business model from the inside was a better option than criticising it from the outside. With over 100 members at the end of 2020, the AIIB has become the second largest MDB after the World Bank. The fact that the AIIB numbers advanced economies among its members has won legitimacy for China's new platform for economic diplomacy, boosting China's reputation as a proponent of (often selective) multilateralism. The bank's strategy of attracting Western donors as members with limited voting rights, of recruiting senior staff from other MDBs and of initially only co-financing projects with other MDBs, using their standards, has earned it credibility, 'triple A' credit ratings and easy access to capital markets, prerequisites for rapid expansion into sectors such as digital infrastructure. However, the AIIB has been criticised for its innovative governance features, the flexibility embedded in its strategies, selective convergence of its standards with those of traditional MDBs and the gap between its green rhetoric and the failure to green its fossil fuel-dominated lending portfolio. The AIIB is set to adopt a revised environmental and social framework in April 2021. Integrating stringent green targets in line with its 2020 strategic target of giving climate financing a 50 % share of all project approvals by 2025 could align the AIIB with other MDBs and ease cooperation with European banks.