30 CSOs from around the world have written to the Asian Infrastructure Investment Bank’s President, senior management and Board to raise concerns about a risky form of investment: financial intermediary (FI) lending.
‘Hands-off’ investing in FIs – third parties like infrastructure or private equity funds – risks diluting social and environmental standards, but is becoming an increasingly popular model used by AIIB. The new bank supported three FIs last year – in India, Indonesia and Asia – and will be considering approval of India’s National Investment and Infrastructure Fund at its March Board meeting.
Hard lessons have been learned by the International Finance Corporation – which channels more than half its money through FIs – with investment ending up backing projects linked to human rights abuses, and displacement and impoverishment of communities, as well as in projects it would balk at funding directly such as coal plants.
The letter asks AIIB to avoid such mistakes and take on best practice, especially in regard to transparency – starting with a commitment to disclose where its FI money ends up.