In 2020, the pandemic caused Asia’s economy to contract by one percent. Due to additional financial support and economic recovery thanks to rising vaccine coverage, economic projections for emerging Asia for 2021 and 2022 are up at 8.6 and 6.0 percent respectively. These numbers exceed projections for the global economy (6.0 and 4.4 percent).

By 2022, Asia's global mobile data traffic share is expected to reach 56 percent. This is despite the low Internet adoption in the Asia Pacific where as many as 1.8 billion people still do not have Internet access. Many low- and middle-income countries in the region lack domestic data infrastructure, resulting in reduced speed and data traffic efficiency. For instance, in South Asia, there are only 0.8 data centers per million people, much lower than around three data centers per million people in North America.

Data centers are essential digital infrastructure for connecting international data hubs in emerging and developed economies through a global network of submarine fiber optic cables and the global Internet. They are foundations and building blocks of a modern digital economy.

AIIB has identified data centers as one of the hard digital infrastructures to be supported under the Bank’s Digital Infrastructure Sector Strategy which aims to promote the growth of the digital infrastructure sector. In October 2021, AIIB approved financing for the Data Center Development in Emerging Asia multicountry project structured through the Keppel Data Center Fund II. Alpha Investment Partners is the investment manager while Keppel Data Center Holdings, is one of the leaders in data center operations and management services in Asia Pacific, which contributes to a robust pipeline for the Fund, particularly in emerging Asia. The project comes at a crucial time in the growth of the data center market in the region.

"The Asia Pacific market rounded out 2021 with a 19-per cent year-on-year growth rate, eclipsing North America's by 10 percent," said Alpha CEO Alvin Mah. "Demand for data centers in Asia continues to grow on the back of continued cloud adoption by businesses, e-commerce, the Internet of things, autonomous vehicles, artificial intelligence, 5G rollouts, digital assets, cryptocurrencies, financial technology and edge computing."

"Riding on positive macroeconomics of the data center sector, the Fund seeks to undertake data center developments in Asia Pacific and Europe to construct a high- quality and diversified data center portfolio," Mah continued.

"This is the first data center project financed by AIIB," said AIIB Senior Investment Officer Sergio Perez, who leads the project team in AIIB. "It is one of the biggest data center investments ever done by any multilateral development bank."

With AIIB’s financing, the Fund has successfully raised and closed USD1.1 billion in total capital commitments including co-investments. Having committed around 21 percent of its total capital commitment by the end of 2021, the Fund is currently generating a strong pipeline.

"The team is building an active pipeline of investment opportunities with the capital raised," said Mah. "At this initial stage of portfolio construction, pipeline deals are consistently reviewed. Transactions are dynamically advanced once we can find mitigants to key investment risks and achieve target return objectives."

A key component of the project is promoting greener digital infrastructure, which is in line with AIIB's thematic priority on green infrastructure.

"The project will deliver investments with impact in climate mitigation," said Perez. "Data centers involve massive energy consumption and the Fund aims to employ eco- friendly design, technologies and processes to build green data centers. One of the challenges will be to use the latest eco-friendly developments in the implementation of the project. Data center technologies are evolving fast, in areas such as immersion cooling, or submarine or floating solutions."

With a commitment to employing leading-edge, eco-friendly technologies and processes optimized for energy efficiency and reduction of carbon footprints, the Fund is well-poised to meet these challenges.

"Keppel places sustainability at the core of our strategy," Mah shared. "We're exploring opportunities to harness renewable energy sources, providing sustainable solutions for our tenant base and increasing our competitive edge in securing valuable land sites."

"AIIB’s participation as a cornerstone investor in the Fund has allowed Alpha to develop an environmental, social and governance (ESG) framework that aligns with the applicable AIIB environmental and social requirements under the Bank’s Environmental and Social Policy," said Perez. "This ESG framework has empowered Alpha to take a structured and systematic approach toward screening, categorizing, and assessing environmental and social issues at the Fund level."

AIIB will also provide support to Alpha in developing climate finance monitoring indicators and in understanding and internalizing the joint MDB methodology for tracking climate finance.

"Given the methodology’s high credibility and market recognition, it reduces the risk of greenwashing and helps Alpha demonstrate its alignment with the Paris Agreement goals," said Perez.