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AIIB, EIB hold potential in green finance cooperation: report

By Wu Xiaobo | chinadaily.com.cn | Updated: 2017-09-06 17:27

The Asian Infrastructure Investment Bank (AIIB) and the European Investment Bank (EIB) have great potential to cooperate in green finance, according to a research report released in Beijing on Monday.

These two banks have overlapping organizational mandates, operational capabilities, and supporting political dynamics that make it possible for them to join hands in green financing for a number of low carbon projects in Asia, the report said.

"Countries particularly in South Asia, Southeast Asia such as Pakistan, India and Indonesia could be potential countries [for the cooperation between AIIB and EIB]," Mathias Lund Larsen, the author of the report, said in an interview with chinadaily.com.cn.

"Most of the financing the AIIB has done so far has already been in cooperation with other multilateral development banks - co-lending through projects, particularly in Bangladesh, India, Jordan," said Larsen, who works as research fellow and director of International Cooperation at the International Institute of Green Finance, the Central University of Finance and Economics.

If AIIB wants to take a low-risk approach to establish a solid balance sheet for a AAA credit rating, it should cooperate with other multilateral development banks such as the EIB, he added.

The EIB and the AIIB on May 30 signed a framework agreement to jointly finance strategically important projects.

Jin Liqun, president of the AIIB, said the agreement was crucial to expand the two banks' partnership in addressing the monumental infrastructure financing needs around the world.

Werner Hoyer, president of the EIB, said he was looking forward to working together with the AIIB to address global challenges, in particular programs that would help tackle climate change, ensuring the provision of sustainable transport and providing clean water.

According to Larsen, the first direct touch point between the AIIB and the EIB was in the AIIB and the World Bank Group co-financed Trans Anatolian Natural Gas Pipeline Project (TANAP), which was supported with loans from a consortium including the Asian Development Bank, European Bank of Reconstruction and Development, as well as the EIB.

The research report pointed out that green bonds especially have great potential for cooperation.

The coupon rates of green bonds are lower at the same maturity compared to regular bonds, offering incentive for issuance, Larsen said.

China witnessed a boom in green bond since last year, with $36 billion of green bonds issued, accounting for 40 percent of the green bonds issued globally.

"[The boom] is based on a strong political commitment both in terms of tangible policies but also normatively suggesting that there is no alternative to a greener trend. And this sends clear signal to financial markets," said Larsen.

Looking forward to the prospect of China's green bond market, he said: "Nothing suggested a saturation point is near. So there is plenty room for expansion."

He held that it was important for investors to change mindset. "In the past it was profitable to invest in coal, for example. Now investors have to understand green is simply more profitable," he added.

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