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Daisy Wu

More than a third of Asian Infrastructure Investment Bank’s (AIIB) sovereign borrowers could face credit rating downgrades by 2050 if global climate policy fails to strengthen, the Beijing-based multilateral lender said in a report.
Under a current policy scenario – in which existing climate rules remain unchanged and global temperature rises by around 2.9 degrees Celsius above pre-industrial levels – nearly 34 per cent of the bank’s sovereign portfolio would suffer downgrades, according to the report published on Monday.
That share falls to just over 11 per cent under a Paris Agreement-aligned pathway that limits global warming to 1.5 degrees Celsius through swift policy intervention and aggressive decarbonisation.
“Rising CO2 [carbon dioxide] emissions without additional carbon pricing lead to more severe long-term economic impacts on sovereigns from climate-driven catastrophes,” the bank said.
Developing economies that relied heavily on nature-dependent sectors remained particularly vulnerable to escalating physical risks, it added.
Infrastructure decisions taken today will shape development pathways for decades to come and must support a more sustainable future
Zou Jiayi, AIIB
The downgrades would not materialise immediately, the report said. Effects on sovereign ratings would only begin to manifest between 2035 and 2040, driven primarily by delayed physical climate impacts such as rising sea levels, extreme heatwaves and severe flooding.
The findings came as the AIIB disclosed it had directed 71 per cent of its regular financing to climate-related projects in 2025, exceeding its 50 per cent annual target for a fourth consecutive year as it ramps up funding for green infrastructure across Asia and beyond.
Of the US$7.47 billion in climate financing the bank approved in 2025, 73 per cent went towards mitigation projects, such as renewable power generation and low-carbon transport, while the remaining 27 per cent supported adaptation and resilience measures.
The bank’s total loan and investment exposure assessed for environmental and climate risk stood at US$82 billion as of the end of 2025.
President Zou Jiayi said in the report that the bank’s new financing had been aligned with the goals of the Paris Agreement, “reinforcing the integration of climate considerations” across its investment activities.
“Infrastructure decisions taken today will shape development pathways for decades to come and must support a more sustainable future,” Zou said.


The risk picture reversed for the bank’s non-sovereign investments, the report found. While sovereign borrowers faced greater long-term physical climate risks under a stagnant policy environment, private-sector and non-sovereign investments faced higher transition risks under an aggressive decarbonisation pathway.
Under the Paris-aligned net-zero scenario, the AIIB’s non-sovereign portfolio – including corporate loans, capital market investments and equities – could see greater credit deterioration towards 2050 due to high transition costs.
“Emissions-intensive industries are particularly vulnerable,” the report said, citing their limited ability to pass through costs and exposure to higher carbon taxes.
To mitigate exposures, the AIIB applied a global baseline for corporate sustainability and climate-related financial disclosures to evaluate risks across its lending and treasury operations.
The bank has also built environmental, social and governance screening into its treasury portfolio, excluding investments in thermal coal extraction, coal-fired power generation, weapons manufacturing and tobacco.
Looking ahead, the AIIB expects its cumulative climate finance approvals to exceed US$50 billion between 2021 and 2030 as it continues supporting member countries through low-carbon and climate-resilient transitions.


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Delayed physical impacts to hit economies by 2050 without stronger climate policies, says Beijing-based multilateral lender


Delayed physical impacts to hit economies by 2050 without stronger climate policies, says Beijing-based multilateral lender.


AIIB warns climate inaction could downgrade a third of sovereign borrowers by 2050

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Delayed physical impacts to hit economies by 2050 without stronger climate policies, says Beijing-based multilateral lender

Delayed physical impacts to hit economies by 2050 without stronger climate policies, says Beijing-based multilateral lender