AIIB’s Opaque Policies Under the Garb of Green Investments
AIIB has come under severe criticism over its opaque policies with regards to Financial intermediary (FI) investments as well as its over-reliance on and delegation of power to the FI client. AIIB currently has 3 active FI projects out of 10 approved projects and one in the pipeline. Of the three, Indian Infrastructure Fund was approved in 2017, National Investment and Infrastructure Fund was approved in 2018, and L&T Green Infrastructure On–Lending Facility was approved in 2019. Another project in the pipeline is Tata Cleantech Sustainable Infrastructure On-Lending Facility, which is in waiting for board approval.
The common thread in all these projects is their objective to mobilise private capital for investments in subprojects that will support an increased supply of renewable energy generation. This would also include support for large renewable energy projects. Another common thread is an absolute lack of information on any of the sub-projects of these FI investments, even for the ones that were approved two years back.
Currently, in the Indian context the central government has claimed there would be 40,000 MW capacity in solar parks by March 2022, twice as high as the earlier target. This target means solar parks alone would contribute to 40% of India’s installed solar capacity in the next three years. The government has so far approved 42 solar parks with a capacity of 23,449 MW. Some of the parks have a proposed capacity of less than 500 MW. There have already been concerns regarding solar sector being pushed for land-intensive utility-scale projects rather than focus on decentralized, rooftop or building-integrated small-scale solar. There has been slow progress in the governments over-ambitious and unsustainable plans of setting up solar parks owing to land acquisition issues. Solar parks in Bhadla (Rajasthan), Anantapur (Andhra Pradesh) and Pavagada (Karnataka) are hosts to over 2 gigawatts (GW) solar parks have already seen protests on issues of land acquisition. In an article, Priya Sreenivasan for Down to earth points out that, “Most parks, developed by nodal
Government agencies identify low-yield land and lease it from the farmers on 25-to 28-year-agreements, a win-win situation for everyone involved as the farmer has a steady flow of income. But in practice, the land acquired by developers isn’t always “barren”. With no clear penalties and regulations that draw the line on land quality, fertile cultivable land is often procured to build solar power plants. ”
In this context, it would not be incorrect to assume that there is a high probability of AIIB finance being invested in some of the big Solar Projects through its FI investment which seems to focus around large renewable also. With its current non-transparent policies, lack of information on projects, are we heading for the same disastrous that we have seen in India with FI projects funded by IFC in the past. It almost seems that these institutions have not learned lessons from their predecessor institutions like IFC whose support through FI investment to a coal-fired power plant GMR Kamalanga Energy Ltd, a company set up to develop and operate a large coal-fired power plant near Kamalanga village in Odisha, led to the first FI complaint ever with their accountability mechanism. This complaint had far-reaching implications with regards to policy changes. Today, IFC discloses information depending on the type of FI client.
AIIB currently does not include information about sub-projects funded through any client FIs on its website. No information at all is publicly available on the sub-projects supported by the three FIs in India. This leaves potentially affected communities in the dark about their rights to know both who is behind the project affecting them, and that the AIIB’s E&S standards should be applied. AIIB also delegates decision-making around risk classification and E&S management entirely to the FIs in which it invests. One of the defences of the AIIB management has been using to questions raised by civil society on lack of information with regards to FI has been the support for green investments. Is renewable now being used as a language for justifying lack of transparency and information? There are two important concerns at hand here:
- Transparency and accountability is not a choice. It is the basic set of principle for any financial institution needs to comply with when making investments, especially for development projects.
- The assumption of renewable projects not having any environmental and social implications is problematic. Large projects have impacts on land, ecosystems and environment even if they are renewable. In countries like India, where land remains the main source of livelihood, lack of stringent, transparent policies will end up in the same trap as for fossil fuel-based energy projects. Land acquisition and loss of commons remain issues of concern for community, and lack of information on projects will raise questions regarding the projects’ development effectiveness even if it is a renewable energy project.
It is time that institutions like AIIB stop using excuses to be non-transparent and unaccountable. Accountability and transparency are non-negotiable values for institutions and especially for institutions form the Global South where communities have faced repercussions and have put up a fight against the opaque policies of Multilateral Development Banks like the World Bank Group.