From Fossil Fuels to False Solutions: Why ADB’s Energy Investments Must Shift Towards A Just Community-Centred Transition
by Alessandro Ramazzotti, Vaishnavi
As the Asian Development Bank (ADB) embarks on a critical review of its energy policy in 2025, following the conclusion of the recent Asia Clean Energy Forum, there is an urgent need to examine its recent energy investments and their implications for sustainable development in Asia and the Pacific.
The stakes are high, with the escalating impacts of human-induced environmental degradation stemming from the massive use of fossil fuels, rampant deforestation caused by industrial agriculture, increasing energy demands, and ongoing economic instability. The decisions made by ADB in its energy sector will profoundly shape the region’s environmental and social landscape for decades to come. This is becoming more urgent in the face of unprecedented climate extremes in the region. A severe heatwave in India and Pakistan reached record temperatures, with Balochistan in Pakistan recording 48°C on May 1, 2025. Concurrently, catastrophic flooding in Jakarta, Indonesia displaced over 90,000 people and caused at least nine fatalities. The World Meteorological Organization forecasts continued heavy rainfall and rising temperatures in South Asia through 2029, amplifying the risk of extreme weather events.
While ADB has positioned itself as a “climate bank” for Asia in the past, pledging to lead the charge towards a sustainable energy transition, data tracked by International Accountability Project’s Energy Finance Tracker a visual database on energy investments of 16 largest development banks tracked from 2022 to April 2025, reveals a troubling pattern of continued investments for fossil fuel industries, false solutions, and large-scale energy projects that harm communities and ecosystems.
Continued investments in fossil fuels and false solutions
Despite public commitments to phase out fossil fuels and lead a just energy transition, ADB continues to channel substantial resources into fossil fuel projects. Between January 2022 and March 2025, the bank invested in 11 projects directly or indirectly linked to the oil and gas sector, and also in 4 projects allegedly linked to coal. These 15 projects’ combined investment amounts surpassed US$ 1.35 billion, about 11.5% of all ADB’s energy spending for the above-mentioned period of time.
For example, in 2023, the ADB approved a US$ 212.75 million loan to finance the construction of a plant powered by “combined cycle gas turbine units with an installed capacity of up to 600 MW for electricity and 957 GCal/h for heat” in Almaty. In December 2024, the ADB approved a project titled Energy Transition Project, which, contrary to what the name implied, financed “the rehabilitation of the Majuro tank farm” in the Marshall Islands. Apart from failing to contribute to the transition to clean energy systems, these projects could arguably be considered efforts at ‘greenwashing’ the bank’s operations.
Further, ADB often finances energy transmission and distribution programmes, with no transparency on the energy sources being supported. While network adjustments are necessary to integrate renewable energy sources, such opaque investments often reinforce fossil fuel-linked infrastructure and potentially lead countries into long-term carbon lock-ins. Two examples of this harmful practice relate to projects located in Central Asia: one financing KEGOC’s transmission network and the other promoting the connection of the Uzbek grid to the wider Central Asian network. The investment in KEGOC — although aiming at some point in the future to integrate renewable energy sources in the grid — is likely connected to fossil fuel sources, considering that both in Shymkent and in Zhambyl (where 2 of the 3 substations/transmission lines financed by the project are located) there are big thermal power plants; the second investment directly finances the construction of a long, high-voltage transmission line that runs from Syrdarya (Uzbekistan) to Sughd (Tajikistan), connecting a large, recently built, development banks-backed gas-fired power plant.
ADB has also been failing to address the legacy harms of its fossil fuel investments, which is exemplified by the Cirebon coal power plants in West Java, Indonesia. For years, affected communities have denounced the adverse impacts on their livelihoods caused by plants’ construction and operations and yet ADB has not provided them with due redress. Worryingly, ADB has now proposed the Cirebon power plants as pilot projects to test the Energy Transition Mechanism (ETM), broadly promoted by the bank as an effective initiative to ensure the early retirement of coal power plants in Asia. However, local communities’ representatives who participated in the ADB’s annual meeting last May raised serious concerns about how the ETM is being applied, that is, in ways that perpetuate and replicate the same issues of the past, starting from the lack of proper community engagement in the process, and no attention to compensation mechanisms to remedy the damages inflicted during the plants’ construction and operations.
Energy financing by loans is driving debt crises in climate-vulnerable countries in Asia
While the ADB markets itself as a champion of sustainable development, its current energy financing strategy often contradicts that mission. Our analysis, based on data collected by the Energy Finance Tracker, reveals that 50% of the ADB’s energy projects from January 2022 to March 2025 were financed through loans, accounting for a staggering 87.6% of the total energy investment amount. In contrast, only 14 percent of projects were funded by grants. Instead of empowering climate-vulnerable nations, ADB’s approach of funding via loans risks worsening financial stress and locking countries into a cycle of debt and dependence while reducing their fiscal capacities for public investment and community-led development planning.
This debt dependence is particularly evident in South Asia, where 59 percent of the ADB’s energy investments during this period were provided via loans. The implications of such lending have been stark in countries like Pakistan and Sri Lanka, which have been undergoing a severe debt crisis over the past few years. In Pakistan, one of ADB’s key borrowers in the region, external debt has climbed above US$ 130 million, with energy infrastructure borrowing contributing to unsustainable debt repayment obligations. The depreciation of Pakistani rupees against the US dollar has further intensified this pressure and diverted national resources away from climate adaptation and mitigation.
The debt problem is compounded by the exchange rate differences between local currencies and US dollars. Of 191 energy projects tracked by the Energy Finance Tracker from 2022 to Q1 2025, 179 were financed in US dollars. Yet borrowers have to repay these loans while earning in local currencies, exposing them to exchange rate volatility and skyrocketing debt burdens. As noted by Ava Saldinger in a Devex article in April 2025, “ Emerging economies often borrow in dollars but earn in local currency- a risky mismatch that can become a debt trap if local currencies weaken. Repayments spike not because borrowers fail but because exchange rates do.” ADB and other MDBs have often passed this risk onto borrowers, a practice that has disadvantaged the most financially vulnerable economies in Asia.
Risks of Financial Intermediaries’ investments
As highlighted by multiple civil society organizations worldwide, development banks’ investments in financial intermediaries undermine accountability and transparency. These intermediaries often have weaker and less transparent safeguard systems and disclosure policies than those of development banks. This limits affected communities’ access to information, remedy, and grievance redressal, therefore jeopardizing their basic human and environmental rights.
Among the 191 projects financed by the ADB in the energy sector in the above-mentioned period of time, 137 (72%) were directed towards the public sector, and the remaining 54 (28%) targeted private sector borrowers. Among the latter, 8 (4% of the total number of projects) involved financial intermediaries, such as commercial banks or private equity funds with sub-investments in energy infrastructure. One of these projects consisted of a US$ 50 million equity investment in Actis Asia Climate Transition SCSp, a fund managed by Actis, LLP, a fund manager domiciled in the United Kingdom. At the time of the ADB’s investment, the fund’s energy infrastructure portfolio included, among other companies linked to fossil fuels in other continents, financial support to GVK Energy, a power utility company that sources energy from coal- and gas-fired power plants in India.
Investing through financial intermediaries based in Europe or the United States of America, and channeling funds into harmful infrastructure in Asia, promotes the same extractivist practices that the transition to sustainable energy systems is meant to replace. By holding the majority of shares in development projects, financial intermediaries ultimately gain financial and political influence in host countries, while local communities face the adverse impacts of the infrastructure they financed. Rather than fostering inclusive development, such investments result in corporate capture and power concentration. To promote a just, inclusive, and sustainable energy transition, the ADB, as well as other multilateral development banks, must limit their reliance on financial intermediaries and instead prioritize direct investments in locally-led initiatives.
Indigenous Rights and Environmental Harms in Clean Energy Projects and Their Supply Chains
While ADB’s growing investment in renewable energy, totaling US$ 9.86 billion and approximately 129 projects, or 67.1% of its energy portfolio, is a positive step away from fossil fuel dependency, not all renewable energy projects are inherently beneficial. Without strong regulatory frameworks and meaningful community participation, particularly from Indigenous communities, these projects can lead to significant social, environmental, and human rights harms. Large-scale infrastructure developed under the banner of “clean energy” can displace indigenous communities, violate land rights, and damage ecosystems, especially when implemented without free, prior, and informed consent (FPIC).
Among the most controversial renewable investments supported by the ADB are large-scale hydropower projects (18 projects tracked in the EFT), most of which have been in South Asia (13), followed by Central Asia (4) and East Asia (2). These projects have been widely criticized for their harmful impacts on river ecosystems, Indigenous territories, and downstream communities, In Nepal, for instance, projects like the Dudh Koshi Hydroelectric Project and various dam and transmission infrastructure initiatives have raised alarms due to inadequate environmental assessments and a lack of free, prior, and informed consent with Indigenous and rural communities. The dangers of large hydropower projects constructed in ecologically fragile regions, such as the Himalayan belt, were evident during the 2023 catastrophic floods on the Teesta River in Sikkim in India, which were triggered by the breaking of the Teesta III hydropower project. This led to loss of life and massive destruction in the region. Despite this, the ADB continues to finance the Sikkim government’s power sector. This move risks enabling the return of hydropower developers without sufficient accountability or support to indigenous communities impacted by loss and damages caused by the floods.
35 percent of the energy finance (67 projects) by ADB has been invested in solar energy, according to the Energy Finance Tracker. Within these investments, many have been for large-scale solar energy projects that have raised serious concerns when developed without adequate safeguards or respect for Indigenous rights. Although often framed as beneficial to the environment and communities, large solar projects can result in land dispossession, forced displacement, and the erosion of traditional livelihoods and culture when built on Indigenous or communally managed lands. A recent example is the proposed 500 MW solar facility in the 1000 MW solar park in Assam, Northeast India, which received funding approval from the Asian Development Bank (ADB) through a $434 million loan in October 2024. The project faced widespread opposition from Indigenous communities as this project was poised to lead to the largest land grabbing in Assam, with it seeking to acquire 2400 hectares of land, which was going to impact more than 20,000 indigenous families from the Karbi, Naga, and many other indigenous communities. Despite the risks of repression, community mobilization, backed by civil society organizations, successfully pressured authorities, leading to the cancellation of the project in 2024.
This case serves as a powerful reminder that renewable energy development must be rooted in justice, transparency, and the meaningful participation of affected communities to avoid perpetuating the very harms it seeks to remedy. Instead of promoting solar through land-intensive solar parks, ADB, with the same amount could have financed more than 72’000 rooftop solar systems — assuming an average cost of US$ 6000 each for the latter — which could have provided reliable access to electricity and energy sovereignty to Indigenous peoples in Assam.
Between January 2022 and March 2025, the ADB categorized 102 of its energy projects as low risk (category C) for Indigenous peoples. However, this risk categorisation can sometimes underestimate or even ignore the significant impacts these projects may have on Indigenous communities and territories. For instance, local communities supported by international advocacy organizations denounced the high adverse impacts that the second stage of the Muara Laboh Geothermal Power Project — financed by the ADB with a loan of US$ 89.70 million — would create in West Sumatra, Indonesia. The project was assigned risk category C for Indigenous peoples’ risks by the ADB, despite the high risk of forced resettlement, impacts on water quality and quantity at the local level, an increase in air pollution due to sulphur gas emissions, and a higher risk of flooding impacts due to landscape changes. Communities in the area recently suffered from floods that devastated their rice fields. The floods were allegedly caused by illegal loggers. Straddling between illegal and legal, but harmful, extraction of resources from their territories, the local Indigenous communities struggle to maintain their livelihoods, and the ADB could be in a position to address that if it just wished to do so.
Indigenous communities are also impacted by transition minerals that are increasingly being extracted for renewable energy technologies. According to a 2022 study published in Nature, nearly half of the global areas designated for transition minerals overlap with indigenous lands.ADB also has been increasing its support for transition mineral projects, which may increase in the coming years, as is indicated by its recent policy paper on the Critical Minerals and Clean Energy Technology Manufacturing (CM2CET) approach. Civil society networks, including the NGO Forum on ADB, have raised critical concerns about this approach, highlighting the irony of ADB promoting mining as “climate-smart” and how this approach doesn’t address the human rights and environmental risks associated with the extraction of transition minerals. These concerns are evident in the investments by ADB in this direction, which could have an impact on indigenous communities. In Mongolia, ADB’s technical assistance project “Climate-Smart Mining for a New Climate Economy” aims to attract investment in rare earth and copper mining but has drawn criticism for weak safeguards and its potential harm to Indigenous herder communities. Recently, it was also announced that ADB will be supporting one of the largest undeveloped gold-copper mine projects in the world, the Reko Diq mines in the Balochistan region of Pakistan, which is being implemented by Canadian multinational company Barrick Gold. This region is home to indigenous Baloch communities whose ancestral lands and cultural heritage risk being exploited due to this project.
Constant lack of accountability
At the ADB’s annual meeting in Milan last May, participating organizations voiced concerns about the fact that countries in Central Asia, as well as elsewhere on the continent, are suffering from a ‘democratic backsliding’, which further complicates local communities’ engagement with development bank-funded projects. The bank’s mission is “to achieve a prosperous, inclusive, resilient, and sustainable Asia and the Pacific”, but if communities’ voices remain unheard or marginalized, the ADB will surely fail to meet its commitments, and using financial leverage to safeguard civic spaces in the countries where it operates is essential to avoid that.
Communities in Bishkek, Kyrgyzstan, faced the direct impacts of this lack of accountability, as they tried to raise concerns about the ADB-funded methane-powered buses in the already highly polluted country’s capital. Apart from ignoring local communities’ right to receive timely information and be involved in consultations about development projects with impacts on their lives, the ADB has been accused of inconsistencies and possible violations of international loan agreements with the city of Bishkek. Despite these concerns, the local government prohibited peaceful protests, arrested activists (including the head of Bishkeksmog, a local group denouncing the impacts of the ADB-funded project), and ignored labor rights violations affecting over 600 trolleybus employees. Legal action by Bishkeksmog is ongoing, but negotiations with the banks have proven difficult, with responsibility for the violations being pushed between banks and local authorities, and no one ready to listen and address the valid concerns of adversely affected people.
In addition to the ADB not being able to impose respect for its safeguards, investments in restrictive countries can complicate things further for affected communities, who are increasingly often the targets of reprisals and retaliation from local authorities. As stated in a recent report by the Coalition for Human Rights in Development and IAP, “civil society groups operating in restrictive contexts and their allies point to the need for development banks to exercise extreme caution, as channeling financial resources to authoritarian regimes risks further strengthening them and, consequently, further restricting civic space.”
Since most Asian countries are considered to have a repressed or closed civic space, the ADB must exercise proper due diligence in order to ensure the bank’s mechanisms are able to provide effective remedy and justice to affected communities, and hold the bank accountable for the harms caused by the projects it finances. The next year’s annual meeting in Uzbekistan, where repression against human rights defenders and journalists has been rampant, will be a testing ground for the ADB to show its commitment to ensuring dialogue with civil society and accountability in its operations.
No Transition without Justice: Communities Must Lead the Energy Future
The ADB must demonstrate that it is listening, not only to governments and investors, but to the communities and civil society organizations who bear the brunt of its energy investments. With the upcoming energy policy review, ADB must make a clear commitmentto halt its financing from harmful, top-down models of development and help build a truly sustainable and inclusive energy future. As climate impacts intensify and debt crises deepen across Asia, the ADB must abandon false solutions such as fossil fuel lock-ins, false solutions and large renewable energy projects, and disregard Indigenous rights and environmental protections. Instead, it must center its financing on decentralized, community-led renewable energy systems that uphold free, prior, and informed consent (FPIC), protect ecosystems, and advance energy sovereignty. Now is the time for a truly transformative energy future, one in which communities on the frontlines of climate change and energy injustice are not just seen as passive beneficiaries; they are given due recognition as experts and stewards leading the just transition.
Alessandro Ramazzotti is a researcher at the International Accountability Project.
Vaishnavi is a Program coordinator for Asia Pacific at the International Accountability Project.
