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Sir Danny Alexander is the vice president for policy and strategy at the Asian Infrastructure Bank, the multilateral development bank set up by China in 2016. He joined the bank after spending five years as a senior member of the British government, after his Liberal Democrat party joined a coalition under former Conservative Prime Minister David Cameron. Under Cameron, the UK pursued the so-called ‘Golden Era’ policy designed to deepen ties with China, which included the decision to join the AIIB as a founding member despite opposition from the Obama administration. In this lightly edited transcript of a recent interview Alexander — who is set to leave the AIIB in October and join HSBC — discussed that history as well as his role at the bank and how it operates.

Q: Your time at the AIIB is ending. What has been achieved since the bank was set up and you joined it eight years ago. 

A: I joined the AIIB at the very beginning and was its first vice president. We’ve gone from being a startup multilateral development bank, which sounds like an odd thing to say, to being well established as one of the family of multilateral development banks, alongside organizations like the World Bank, the Asian Development Bank, the EBRD and so forth — with a strong reputation for good governance and for high quality projects and, I think, increasingly making an impact in a variety of areas, especially around climate change. AIIB is the first new multilateral development bank of the 21st century. It’s learned some lessons from the others but is fundamentally part of that gene pool. And it’s been an amazing privilege to be part of the process, and leading the establishment of this new organization, 

As with any other multilateral institution, the leadership team is truly global, and we have more than 600 staff from more than 70 different nationalities. So, it’s really an international institution, and by blending those experiences together, you create the understanding and the knowledge to move the organization forward. 

How does AIIB now sit when compared with the likes of the World Bank, the ADB and so on? 

I was one of the ministers, alongside [former UK finance minister] George Osborne, who were responsible for making the recommendation as to whether the UK should join the AIIB or not. Back then, in 2014 and 2015, the debates were about whether this institution was going to be set up according to high standards. Was it about building up the multilateral system? Or, as some people said, was it about undermining existing institutions? 

I think all those concerns have been comprehensively disproved by experience. If you look at the governance and standards of AIIB, they are functionally equivalent to those of the World Bank, or the ADB, or the European multilateral institutions. And that’s enabled us to build very deep partnerships with those organizations. Today, AIIB is the largest co-financing partner of the World Bank, and of the Asian Development Bank. 

Because we have similar ideas and approaches to decision making, and the same high standards for our projects, we’ve been able to work together on some very significant initiatives for our region. During the Covid 19 pandemic, for example, AIIB set up a crisis recovery facility through which we allocated $20 billion to support members through that crisis. More than half of that was spent through co-financed operations with the World Bank and ADB, these institutions coming together to really make a difference. 

What’s more, AIIB has really taken its place in international fora. In the last two or three years, there has been a strong agenda in the G20 about strengthening the multilateral system, building up the capacity of multilateral development banks to meet global challenges like climate change, and really encouraging the MDBs to work together as a system. AIIB has been a leader in that: some of the ideas that are being followed are ones that we originally proposed. In April this year, the heads of the MDBs had their first ever retreat, where they spent a day together discussing different ways to deepen cooperation. That was an idea that our President Jin Liqun put forward. There’s a big debate now about mutual recognition of standards between MDBs — again, that’s something that AIIB started. 

Has the growth of the bank been in line with what you expected eight years ago?

I think it has exceeded our expectations, quite honestly: We now have $54.5 billion of approved lending in over 280 projects in 37 countries. It takes time to set up these kinds of institutions, to do it well and to start to make an impact. We’ve built a very high-quality business pretty quickly and an impactful one. AIIB has turned out so far to be right at the upper end of the expectations that we had in the coalition government [the UK government under former prime minister David Cameron] about what this institution would turn into. 

When the bank was set up the Obama administration was concerned about the UK and other western countries joining and having senior figures like yourself involved. Have those concerns gone away, or do they persist?

My recollection of that time is that there were different views in the U.S. and in other countries. And whilst it was clear that it would be very difficult for the U.S. to join, because taking such a matter through their Congress would be extremely difficult, even then there were different views about what other countries should do, and what the intentions of this institution really were. 

…by and large, all of our members have tried to keep bilateral differences or geopolitical issues out of the bank, and to focus on taking decisions through the governance processes in the way that sets them aside.

The UK took the view that by joining we could help it to become the best version of itself. And together with many of our European partners and others, we have contributed to forming a very high-quality institution. Although the U.S. is not part of AIIB, the door is open. The bank has good relations with the U.S. Treasury, and with U.S. institutions: We work with American banks and American companies on projects and so on and so forth. 

My sense is that they also recognize that the concerns that existed back then are not worries anymore. So, in that sense, the progress we’ve made in the first nine years of the bank has been very positive. 

When you joined the AIIB, it was around the height of what the Cameron government referred to as the ‘Golden Era’ of UK-China relations. How do you assess those relations now? 

It’s true that bilateral relations between China and many countries, including the UK, have become more difficult over the last few years. But when I look at the AIIB specifically, I’d say the UK, France, Germany, Australia, Italy, these members have been amongst the most committed and supportive of the bank’s members. Whatever the bilateral relations, a well-functioning multilateral system is in everybody’s interests. When bilateral relations are trickier, having a well-functioning multilateral system involving a multitude of institutions is important. Those institutions become the place where common agendas can be delivered, because there is a strong governance process and system that means that everybody has their say, and decisions are made by broad consensus and not imposed by anybody. That’s how the AIIB functions. And so the UK is as committed to the AIIB as it ever was. 

One question that has persisted is over the precise influence of the Chinese government and the Communist Party over the AIIB’s priorities and operations. What has your experience been? 

My experience working in the bank has been that we’re part of a truly global institution, we have a governance model that represents all of our members, that is well run and accountable, it’s apolitical, it’s internationally recognized for our governance, and all of our shareholders, including China, which is the largest shareholder, are strongly committed to that model and behave accordingly. 

And so, these allegations about undue influence are just nonsense. I haven’t seen that during my time at AIIB. 

What I have seen is occasionally robust discussions in our board of directors — as you would expect — about the bank’s priorities and direction. But by and large, all of our members have tried to keep bilateral differences or geopolitical issues out of the bank, and to focus on taking decisions through the governance processes in the way that sets them aside. That’s quite challenging, and it’s a testament to the commitment of those members to AIIB, that they’re very consistent in trying to behave in that way. 

And I would say that’s true of China as the major shareholder. I think China has conducted itself properly, as have other shareholders. 

The AIIB’s former communications director Bob Pickard quit the bank in 2023 and made several specific allegations about how the bank operates, including things like access to its president Jin Liqun and the presence of Communist Party officials within the bank. What did you make of his allegations, and did you recognize at all the picture that he portrayed?

I didn’t recognize the picture at all and didn’t recognize it as the truth about how the AIIB works. 

As you know, we conducted our own investigation into this, with the help of external counsel. That was published transparently and discussed by our board. And you can check with the bank’s members directly. They’ve paid close attention to the bank; they have been involved with this process — and they don’t share these concerns. Our goal, as a multilateral bank, is to uphold the highest standards, and that’s been confirmed again and again by the way we work, by the decisions we make, by what we do, and by the view of external players — including that of the financial markets, by the way, and as evidenced by the good relations we have with our peers. 

So no, I don’t recognize the picture. It’s just not borne out by my experience of the bank, which is as I was describing earlier.

To what extent, though, have the bank’s lending policies been influenced by Chinese priorities, such as the Belt and Road Initiative?

We work independently according to our own priorities. One priority is climate change and financing infrastructure that helps our members to deal with both reducing carbon emissions and being resilient to the effects of climate change. I’m personally very proud of the way I’ve helped to drive the AIIB in that direction, because I think that we’re making a big impact. Last year, 60 percent of our lending was classified as climate finance: in other words, for infrastructure projects that contribute to reducing carbon emissions or to protecting people against the effects of climate change. 

One of our other priorities is cross-border connectivity and regional cooperation. We want to support members to enhance their links, whether that’s cross border electricity grid connections to help share renewable energy, whether it’s ports and airports and roads and railways to facilitate the movement of goods and people. 

But when we assess our projects, we assess them against our own strategy and standards. We don’t assess them against any other external mark or label, whether that’s Belt and Road, whether that’s the European Union’s Global Gateway, or whatever. That said, if initiatives like the BRI throw out good projects that are high quality and meet our standards, that’s fine, but we take our projects from our member countries and from private companies, and we assess them according to our own standards and our own objectives. And those are agreed by our board of directors, which represents 109 members. It’s about building a consensus amongst all of those members about what we should do. 

You can look at where our money is going. India is our largest borrower. Other major borrowers include Indonesia, Turkey, Bangladesh, Pakistan, China too. We’re really spreading our resources according to where the need is, according to where the good projects are, and only driven by those kinds of considerations.

How important is financial return to the bank? 

We do look very carefully at the financial and economic sustainability of our projects. That’s critical. We’re not financing white elephants: we’re financing projects that are clearly going to make a difference to improving the GDP, to improving the sustainability of our members, and we want projects that are going to be financially sustainable as well. 

I’m always left leaving a COP meeting, for example, with two things in mind. One is hope based on the innovation, the ideas, the commitment that you see. And on the other hand, there remains a lot of work to be done.

When a multilateral is lending to governments, it’s more like a cooperative. You have a common interest rate that is set by the board, applied to every member, whether they are a large, pretty strong economy or a very small developing country. We don’t differentiate the pricing: lending is based on the quality of the project, and everyone gets the same price. 

When you’re lending to the private sector, it’s a bit different. You’re looking at the creditworthiness of the project, and you are assessing your pricing accordingly. And so that means there’s kind of a double bottom line for us. You’re looking for development impact, what good is this project going to do? And you’re looking for the financial side to be right. 

What sort of climate change goals and standards do you have?

There’s a common definition among the multilateral banks about climate finance — about what qualifies as climate change mitigation, and what qualifies as adaptation, and we follow that very rigorously. Climate change is one of the areas where MDBs really do cooperate as a system, our climate heads meet almost every week to discuss different aspects of this. 

For mitigation, we finance a lot of renewable energy. We find ourselves financing quite a lot of solar and wind power, and we’ve also financed electricity grid improvements. We know in many countries that unless you can get the grid right, then you’re not going to be able to maximize the benefit of the renewable energy opportunities. 

The other aspect is about adaptation. There are hundreds of millions of people in Asia who are directly vulnerable to the impact of climate change today, not in a few years’ time. We saw catastrophic flooding in Pakistan a couple of years ago, for example, while there’s also heat waves, droughts, and the impact on water resources. And so again, we look at making sure that every project is adapted to the possible impacts of climate change, whether it’s a climate focused project or not, every project must meet that test. 

In June, the AIIB board also approved a proposal for a new instrument called climate policy-based financing, so that we can make loans to our members to support them to make policy changes that are going to help them with their climate transition, maybe regulatory reforms, this kind of thing. 

Has your time at the AIIB left you optimistic about cooperation between countries in the West and China on climate change?

I think it leaves me more optimistic because you are seeing an enormous amount of innovation in China and in many other countries around the world, including in the UK and in Europe, and you see a willingness to cooperate. 

We know that the battle against climate change is going to be won or lost in Asia. That’s now where most of the emissions are. It’s where there is still a huge amount of development to go and therefore the need for electricity is going to multiply over the coming years. And so, we find within AIIB’s membership, a willingness to cooperate. I know there are tensions around some of these issues, but fundamentally, we find that. 

I’m always left leaving a COP meeting, for example, with two things in mind. One is hope based on the innovation, the ideas, the commitment that you see. And on the other hand, there remains a lot of work to be done. And it is the role of multilateral development banks like the AIIB, among others, to catalyze the acceleration that is going to get us to the scale and speed that we need. As I leave AIIB, that’s my main reflection, that AIIB has done a lot, but we have to do a lot more. And so whoever my successor is, will have to focus on that.

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