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Green Finance / Treasury & Capital Markets
AIIB issues first climate adaptation bond
Five-year offering raises A$500 million to finance projects aimed at making infrastructure assets more resilient
The Asset 11 May 2023

The Asian Infrastructure Investment Bank (AIIB) has priced its first climate adaptation bond, a five-year offering that has raised A$500 million (US$337 million).

Issued under the bank’s sustainable development bond framework, the bond will have its proceeds allocated to projects where at least 20% of the total financing is for climate adaptation.

The climate adaptation bond aims to raise awareness about climate-resilient and adaptive infrastructure investments. The 2015 Paris agreement established the global goal of adaptation and AIIB has committed to be fully aligned with the pact by July 1 2023.

According to the bank, climate adaptation financing is about investing now to make infrastructure assets more resilient so that as the effects of climate change intensify, infrastructure is able to protect vulnerable communities in the long term.

With the issuance of the bond, AIIB says it has fulfilled its commitment at COP27 in Sharm el-Sheik, Egypt last year to issue a bond focusing on climate resilience and has successfully engaged investors in mobilizing finance for climate adaptation, which is critical to achieve the necessary scale of investment required to support vulnerable members in the region.

Target exceeded

The bank has a target to reach 50% climate finance by 2025, which in 2022 it exceeded by approving 56%, or US$42.39 billion, in climate finance (including both climate mitigation and adaptation).

By 2030, AIIB expects that its cumulative climate finance will reach US$50 billion. Its investments in climate adaptation finance comprise projects in water, urban development, transportation and energy. They include standalone projects, co-financed projects, and sub-components of projects.

Danny Alexander, AIIB vice-president for strategy and policy, comments: "AIIB is committed to fund infrastructure investments that promote climate adaptation. This can be seen in our growing pipeline of climate adaptation projects, currently estimated to be approximately US$1.5 billion.”

Adds AIIB treasurer Domenico Nardelli: "We are happy to be back in the Australian dollar market for the third time since 2021. Australia was one of the first domestic markets that the bank strategically targeted and we are happy to maintain a continued presence there.”

The bond has a re-offer spread of 58bp above the asset-swap spread, priced at 99.574% with a yield of 4.095%.

Among the investors, 53% were central banks and official institutions, 27% banks, and 20% asset managers. By geography, 77% of the investors were from Asia-Pacific, 20% from EMEA, and 3% from the Americas.

The joint lead managers for the deal were Commonwealth Bank of Australia, Deutsche Bank (Sydney Branch), J.P. Morgan Securities Australia, and The Toronto-Dominion Bank (London).

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