Berlin, Amsterdam | 21 October 2021

Accountability matters - not only to provide justice to communities that have suffered harm as a result of projects, but also so that multilateral development banks (MDBs) can learn from mistakes and avoid repeating them. The world’s newest MDB, the Asian Infrastructure Investment Bank, recognises this, and this is why the bank established an accountability mechanism - the Project-affected People’s Mechanism (PPM) in 2019.*

Yet in AIIB’s six years of operation, after 142 projects approved and over $28 billion invested, the PPM has yet to receive a single complaint. A new report released today by Recourse and Urgewald - to coincide with the AIIB’s annual meetings which start next week - examines the possible reasons for this.

The report looked both at the AIIB’s current portfolio and also at policies guiding the scope and implementation of the PPM. It found that of projects funded by the AIIB to end of September 2021:

• The majority are ineligible: Of 142 projects, the majority (72) are not eligible for the PPM.
• The majority of AIIB's overall investments - 51.4% as of end September 2021 - are co-financed with other MDBs. Under AIIB’s rules, this excludes them from accountability under the PPM, with rare exceptions. 68 out of the 72 ineligible projects are co-financed. The AIIB is an outlier among MDBs on this exclusion – it is the only one to exclude co-financed projects from accountability.
• There is an exception to the co-financing rule, evident in several projects. The PPM will accept complaints relating to projects co-financed with the International Finance Corporation (IFC), even though IFC standards apply. This shows it is possible to do so, and the report urges the AIIB to ensure people affected by all of its projects have access to remedy and redress.
• The PPM also excludes all capital markets projects, an area of growing interest at AIIB. At present, there are just four capital markets projects, but they already make up a significant portion of the portfolio at 4%, worth $1.1 billion.
• Largest proportion of eligible projects supported through financial intermediaries (FIs): Of the 70 eligible projects, the largest proportion - almost half - are FI investments, which are difficult to trace as there is extremely limited transparency about where money ends up. If communities cannot find out whether the AIIB is investing in the project affecting them, then their access to remedy is effectively blocked.
• Political space is a vital factor. The report examines where the 70 potentially eligible projects are located. The top four countries are India, Turkey, China, Bangladesh, where there is a lack of political space and freedom of expression, which can have a chilling effect on communities’ ability to speak out. The IFC's Compliance Advisor Ombudsman (CAO) has the most complaints of any accountability mechanism by far. And yet CAO has received no complaints from China, just one from Bangladesh, four from Turkey (which all pre-date the current Erdogan rule), and several from India, the vast majority of which pre-date the Modi regime.

Report author Kate Geary of Recourse said, “The AIIB clearly has an accountability deficit, when its accountability mechanism does not apply to half of its portfolio. This leaves communities affected by AIIB’s investments no way to ensure AIIB is living up to its environmental and social commitments. We call on the AIIB to close accountability loopholes when it reviews the PPM.”

To ensure the AIIB significantly reduces its accountability deficit by making the PPM more accessible, the report recommends:

1. The PPM policy should include all projects financed by the AIIB: Since the majority of the AIIB’s portfolio comprises co-financed projects with other MDBs, a general exclusion of those complaints represents a serious accountability loophole. In cases of co-financing, collaborative investigations are common, where IAMs carry out reviews against their own procedures. For the sake of institutional learning, accessibility, and best practice, the PPM Policy should prioritise collaborative investigations over the current practice. The PPM should also be available to communities affected by capital markets investments.

2. The PPM policy must address shrinking political space for affected people:

• Pre-conditions for affected people to file a complaint should be removed as a matter of urgency (for example, that an individual cannot file). Language on access must be clarified, for example regarding steps for affected people to approach local Grievance Redress Mechanisms and AIIB management before filing a complaint to the PPM. At present, this could be misunderstood and prevent people from filing.
• Moreover, communities should have the right to choose their representatives. Complainants benefit from the support of expert NGOs and representation is key to level the playing field between affected people and financial institutions. The more complicated policies are, the more expert knowledge is needed to file a complaint. At present, AIIB’s PPM says that complainants may only call on support from an expert group outside their country “in exceptional circumstances”.
• The PPM Policy has the provision to suspend a case if affected people seek remedy through legal means in parallel to a PPM complaint. There is no reason why negatively affected people should not seek legal avenues to claim their rights in addition to using the PPM. In this respect, the PPM has a depoliticising effect by forcing affected people to choose one avenue over the other to make their voices heard.

3.  The PPM must increase awareness and visibility about its availability among affected communities: A simple way of doing this would be to ensure AIIB’s involvement and the details of the PPM are advertised at project sites in a language and manner accessible to local people.

The AIIB has committed to review the PPM “within five years”. The report stresses that the promised review should not be limited to the PPM but also address the wider institutional conditions and related policies that affect AIIB accountability, to make sure that the AIIB can be held accountable effectively.

Report author Dustin Schäfer of Urgewald said, “The PPM review must be open and transparent, involving not just other accountability mechanisms and MDBs, but NGOs and communities affected by AIIB projects. The AIIB should consult not only on the PPM policy but on the scope of the review, its timeline and the plan for consultation.”

The report is available for download here.

FOR FURTHER INFORMATION PLEASE CONTACT:

Kate Geary, Recourse: [email protected], +44 7393 189175

Dustin Schäfer, urgewald: [email protected], +49 176 80511310

* Note to editors: The AIIB PPM is a mechanism to receive submissions from Project-affected people who believe they have been or are likely to be adversely affected by AIIB’s failure to implement its environmental and social standards (known as the ESP.) See: https://www.aiib.org/en/policies-strategies/_download/project-affected/PPM-policy.pdf