Jan 10, 2019 (China Knowledge) - The Asian Infrastructure Investment Bank (AIIB) has set up a new USD 500 million fund which it will be investing in corporate bonds linked to infrastructure projects in emerging Asia.
The new fund aims to further develop infrastructure as an asset class, debt capital markets for infrastructure and promote the integration of environmental, social and governance (ESG) principles in fixed income investment for emerging markets in Asia.
The fund termed as the Asia ESG Enhanced Credit Managed Portfolio will consist of corporate bonds issued by infrastructure related issuers, quasi-sovereign bonds and green bonds in which the funds raised from such bonds are used for sustainable infrastructure.
Bonds purchased by this portfolio will be evaluated based on ESG investing principles formed by the AIIB’s Environmental and Social Framework.
The AIIB will start off by using its own capital to build awareness for ESG based investing and support other investors looking to create similar platforms or participate in the bank’s initiatives. Ultimately, the AIIB aims to create an ESG market in the region.
Currently, infrastructure investments in Asia face a large financing gap. In 2017, the Asian Development Bank estimated the financing gap for economic infrastructure in Asia to be around USD 460 billion annually.
Through the development of an ESG market in Asia and debt capital markets, the region will likely benefit from having better access to capital, thereby reducing such financing gaps.
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