AIIB's Sir Danny Alexander: bank to amplify Asia's voice at Cop26

In exclusive interview, former UK Treasury chief says multilateral lender in a position to address the challenges and opportunities that the energy transition and climate change efforts represent for Asia

The Asian Infrastructure Investment Bank was born just a few weeks after the Paris Climate Accords were signed.

Since Cop21 and the historic global pact to limit global warming, the institution has built up a track record that includes financing renewable energy, urban transport systems, water and sanitation, and low-carbon technology projects.

To date it has funded some 147 projects worth about $28 billion.

Next week, AIIB will be represented at Cop26 in Glasgow, having already pledged that by 2025 at least half of its investments will be for projects related to efforts to fight climate change.

“The green transition is the development story of the first half of the 21st century. But to do that, we have to create the right tools to help people both have the knowledge, the information, the capacity and also the finance to achieve those changes,” says Sir Danny Alexander, AIIB’s vice president for policy and strategy.

AIIB has also been helping to develop in Asia capital markets that can mobilise investors to invest in green bonds and environment, social and corporate governance (ESG) related products.

The green transition is the development story of the first half of the 21st century
Sir Danny Alexander, AIIB

Sir Danny, who was in Abu Dhabi this week for the annual meeting of the multilateral development bank’s board of governors, hosted by the UAE, will attend Cop26 where global decision makers will deliberate on how to deliver the goals set out in 2015 – incidentally the same year that he was knighted by Queen Elizabeth II.

“This is a massive challenge. It's a particularly massive challenge for Asia, where most of the people in the world live, and where most of the impact of climate change will be felt if it's not mitigated, but in our experience, this can be done. We just have to scale up. All the ingredients are there, we just have to scale up and have the commitment.”

He says that AIIB will be in a position to speak up for the challenges and opportunities that the energy transition and climate change efforts represent for Asia, which has a different experience from other regions such as Europe.

“I think this is a central challenge for these kind of meetings, to be honest, that it's easy for them to get devoted to ‘what are the new commitments being made by developed countries’. And of course, that's very important. But actually the things in a developed country, where you can roll out programmes, insulate every home or whatever … [in comparison] the challenges of developing countries [are] completely different,” says Sir Danny.

“In a situation where many societies still have a long way to go to achieve the basic development needs that their people have a right to expect … you've got to do it in a way which is also consistent. I think that's achievable.”

It is a common point of contention that the more developed nations, historically the biggest polluters, are now asking other countries, still on their own journeys of economic prosperity, to make sacrifices that they did not have to, in the name of global climate efforts.

“To really solve this problem, we have to develop mechanisms that can be applicable in those kinds of circumstances. That's where banks like ours come in,” says Sir Danny.

While gatherings such as Cop26 always risk falling into “a kind of competition among NGOs, who can make the most outlandish claims … you have got to be focused on what is the reality and how we can change that reality”, says Sir Danny, who before joining AIIB in February 2016, was chief secretary to the Treasury in the UK during the coalition government of 2010-2015.

In the lead-up to the meeting in Glasgow next week, a number of countries have made commitments to help meet climate goals. The UAE, for example, has announced a strategy to achieve net-zero carbon emissions by 2050.

This “is very ambitious, but also achievable”, says Sir Danny.

“To do that, you need to mobilise huge amounts of energy from society, money from the private sector and then in many contexts, also development institutions like ours. It's a whole of society approach that has to be taken because you know that this transition is going to affect for the good every aspect of the way we live our lives,” he says.

“That means a lot of change. And, the pace of change and innovation and development is going to accelerate even faster.”

It also means that people around the world “have to get used to change being the only constant”.

“Climate change adaptation [and] resilience is critical. So if you're building a road, you need to make sure that it's resilient to what nature may throw over, not just [in] the next few years, but [in] the next few decades.”

Sir Danny says AIIB understands where it “can make an impact in terms of climate change mitigation, adaptation, climate protection and new technology for climate, which is advancing very rapidly. And in terms of capital markets and private sector”.

“We've committed to aligning all of our projects to the goals of the Paris Agreement. So it means even for projects where the central purpose is not climate, we have to make sure that it's done in a way that is consistent with what Paris is trying to achieve.”

Updated: October 28th 2021, 2:43 PM