The Asian Infrastructure Investment Bank's (AIIB) board of directors has approved US$500 million for a managed credit portfolio that aims to develop infrastructure as an asset class, develop debt capital markets (DCM) 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 the proceeds are directed to sustainable infrastructure and other productive sectors. 



Aligned with the Bank's green strategy, the portfolio will include a strong ESG component. Bonds purchased under this portfolio will be screened, assessed and managed based on ESG investing principles set out in the 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," comments AIIB vice president and chief investment officer, D J Pandian.

"Integrating ESG standards into capital markets in Emerging Asia will help build capacity for, and interest in responsible investing, which is necessary if we are going to build a sustainable future," adds Pandian. 


According to the AIIB, ESG investing is still in its infancy in Emerging Asia. Only a few AIIB members who pledge support for the United Nations-supported Principles for Responsible Investment come from the region. To help build an ESG market, AIIB will partner with an asset manager to build capacity around responsible investing by producing research on ESG investing. This research will be based on knowledge gained from applying AIIB's ESG framework.

In the long-term, AIIB will engage with market participants - including corporates and data providers - to improve disclosure, share knowledge and expand ESG rating coverage in Emerging Asia. 



"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," says 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," adds Lee.