The Weekend Essay: AIIB accused of backing unacceptable developments

Published by MAC on 2019-10-12
Source: Centre for Financial Accountability

It falsely claims they're "renewable"

AIIB’s Opaque Policies Under the Garb of Green Investments

By Anuradha Munshi

Centre for Financial Accountability [India]

27 September 2019

AIIB [Asia Infrastructure Investment Bank] 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 which
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
renewables also.

With its current non-transparent policies, lack of information on
projects, are we heading for the same disasters 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 questions raised
by civil society on lack of information with regards to FI on 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:

1) Transparency and accountability is not a choice. It is the basic
set of principles any financial institution needs to comply with
when making investments, especially for development projects.

2) 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
from 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.