Multicountry: Keppel-Pierfront Private Credit Fund L.P

OBJECTIVE

The objective of the project is to promote private credit for infrastructure as an emerging asset class in the Asia-Pacific region which would mobilize private capital to address the financing constraints of mid-cap companies in the infrastructure sector.

DESCRIPTION

The Asian Infrastructure Investment Bank (AIIB) has made an equity investment of about USD88.7 million in the Keppel- Pierfront Private Credit Fund L.P. (the Fund) with a reserve of a co-investment envelope of up to USD50 million to invest alongside the Fund. The Fund will invest in private credit instruments of companies and projects across renewable energy, transport, digital infrastructure, environmental infrastructure, energy and natural resources and social infrastructure in the Asia-Pacific region.

At the time of AIIB’s investment, the Fund has already deployed around USD200 million across six investments. AIIB will be participating in four of the six investments already entered into by the Fund. The two investments that the Bank is not participating in are Lodgis, a Viet Nam-based hospitality group and M-Towers, a Myanmar-based telecommunication towers operator. AIIB will have no economic interest in or exposure to either of these two investments. The Fund achieved final closing in September 2022, raising about USD700 million (including co-investment commitments) from investors.

ENVIRONMENTAL AND SOCIAL INFORMATION

Applicable Policy and Categorization. AIIB’s Environmental and Social Policy (ESP) including Environmental and Social Standards (ESSs) and the Environmental and Social Exclusion List (ESEL), is applicable to the Project. The Fund shall not invest in coal-related activities and other activities in the ESEL. As a Limited Parter, the Bank has excuse rights, it can opt out of certain investments that do not meet AIIB ESF requirements. The Project has been placed in Category FI, because the financing structure involves the provision of funds through a financial intermediary (the Fund), whereby AIIB delegates to the Fund Manager the decision-making on the use of AIIB’s funds for investments in subprojects that meet the conditions in the project’s environmental and social (E&S) documentation in the form of eligibility criteria and investment guidelines, and applied through an Environmental, Social and Governance Policy (ESGP).

Environmental, Social and Governance System. The Fund Manager’s ESGP includes screening, categorizing, ESG risk rating and appraisal, contracting and monitoring of investments supported by AIIB in accordance with the ESP, the ESEL, where applicable, the AIIB’s ESSs including appropriate processes for timely disclosure of E&S information, conduct of stakeholder engagement activities, and establishment of subproject-level Grievance Redress Mechanisms (GRMs) to address concerns and grievances from both project workers and project-affected people (PAPs). In addition, for all future investments supported by AIIB, the Fund will require the establishment of a fit-for-purpose ESGP at subproject level in accordance with the ESP and, where applicable, the ESSs. The sub-project level ESGP shall include appropriate processes for conducting adequate E&S assessment and timely disclosure of E&S information on new or expanded activities. These will include stakeholder engagement activities, and establishment of subproject-level GRMs to address concerns and grievances from both project workers and project- affected people. A member of the Fund Manager’s management team will be responsible for the oversight of the ESGP, supported by an investment professional and, to the extent required in the E&S documentation, external specialized E&S resources for conducting ESDD on all investment opportunities and preparation of an Environmental and Social Action Plan and other covenants for inclusion in the investment documentation. The Fund Manager’s staff who are responsible for the oversight of ESGP will undergo training in its implementation.

Environmental and Social Aspect. The Fund Manager will apply eligibility criteria for selection of investments to avoid high risk projects which may have, (i) significant adverse impacts to community health and safety as a result of construction/operation of the assets, (ii) significant number of serious injuries and/or fatal accidents during construction and/or operation of the assets, (iii) involuntary resettlement of people and (iv) impacts on critical habitat, Indigenous Peoples and cultural resources. These sensitive activities are either to be avoided or managed in accordance with AIIB’s ESP, including applicable ESSs. The current portfolio of seed assets and new investments closed by the Fund prior to the adoption of the updated ESGP has been retrospectively reviewed in accordance with the updated ESGP, to determine the assets' acceptability and material gaps with the applicable E&S requirements of AIIB. The retrospective review indicated that the Fund’s loan to a controlling shareholder in a large renewable energy company with a net installed capacity of 6.2 GW of solar, wind and small & medium scale hydropower projects, and a robust pipeline of all three types of generation, required high level of caution on E&S matters, to which the Fund committed. AIIB will validate the finalized ESGP and conduct a prior E&S review of the initial subprojects to be financed using AIIB funds. Subsequently, AIIB will conduct prior review of subprojects presenting significant ESG risk level where the Fund has medium or low leverage on ESG matters as per the ESGP, including all Category A subprojects, and will receive an annual ESG monitoring report on the ESG performance of all AIIB-supported investments.

Information Disclosure, Monitoring and Project Grievance Redress Mechanism (GRM). E&S information of selected subprojects will be disclosed in accordance with the ESP, in particular for higher risk category subprojects. The Fund Manager will be required to periodically disclose the names, locations and sectors of subprojects that are being supported by AIIB’s financing, subject to regulatory constraints and market sensitivities. The Fund Manager will monitor the implementation of the Project and submit an annual E&S monitoring report to AIIB reporting on the E&S performance of all AIIB-supported investments. AIIB will conduct field visits to selected subprojects where possible. Any grievances received by the Fund through the project GRM will be managed by the ESG officer, working together with the relevant Fund Manager representatives to address views of affected people, enquiries or concerns regarding its own ESG processes and outcomes as well as E&S impacts and performance of AIIB-supported subprojects. The subproject-level GRM for both subproject workers and subproject-affected people are required to establish by each subproject supported by AIIB. Information of the Fund’s GRM and subproject-level GRMs as well as the Project-affected People’s Mechanism (PPM) of AIIB will be timely disseminated in local language at least to the communities’ surrounding area of subprojects.