Citigroup

Summary of Citigroup's Engagement with Sustainable Finance Policy

Sustainable Finance Lobbying Overview: Citigroup (Citi) appears to have had some engagement on sustainable finance policies, but details of this engagement are generally described in broad terms. Citi has taken mostly positive top-line positions on sustainable finance but where Citi has engaged with specific policies, it has been more mixed.

Top-Line Messaging on Sustainable Finance Policy: Citi has recognized issues in the financial system, like short-termism, that obstruct global climate goals, and has appeared to support the need for systemic reform to deliver a sustainable financial system. Citi has supported emissions reduction in line with a 1.5C target.However, at the World Economic Forum’s 2020 meeting in Davos, then-CEO [726156 Michael Corbat stated that it was not the banking system’s role to enforce standards around climate change. Jane Fraser became CEO after Corbat’s retirement in February 2021 and has since made public statements of support for the Paris Agreement and for financial sector action on climate change. However, a letter Citi submitted to the Municipal Advisory Council of Texas in November 2021 appears to support continued investments in fossil fuels. Citi has stated broad support for sustainable finance regulation, including in its 2020 CDP report and a 2020 letter to an EU Commissioner. In TCFD and ESG reports from 2020 and 2021 Citi mentions engagement with regulators and policymakers as well as trade associations on several sustainable finance policies and frameworks, but details of this engagement and positions on policies are unclear.

Position on Regulated Corporate ESG Disclosure: Citi has expressed top-line support for regulated corporate ESG reporting, while taking a mixed position on specific policies. In its 2021 CDP report Citi stated support for improved standards for corporate climate disclosure and in a 2021 white paper Citi called for a globally consistent disclosure framework based on a double materiality approach. Citi also supported the need for disclosure regulations in its 2021 TCFD report and in a 2022 Global Perspectives paper. However, in its letter to the SEC in June 2022, Citi outlined its objections to the Commission's proposed climate disclosure rule and requested some requirements be removed or softened.

Position on Taxonomies and ESG Standards/Labels/Benchmarks: In 2021 and 2022 white papers and briefings, Citi stated support for a green taxonomy, calling taxonomies “vital to the green finance effort” and emphasizing their importance in combatting greenwashing. However, in a 2021 perspectives paper, Citi warned against creating a taxonomy that is overly restrictive, suggesting it would hinder green investment. In a 2021 report Citi stated support for the EU Green Bond Standard.

Position on Incorporating ESG Factors Into Risk Management/Prudential Regulation: In its 2021 TCFD and ESG reports and in its 2022 Environmental and Social Policy Statement Citi mentions engaging with regulators on climate risk policy, but details of this engagement are unclear. Citi’s 2021 CDP report suggests some support for regulatory action on climate risk regulations for banks, but in a September 2022 House Financial Services Committee Hearing, CEO Jane Fraser appeared not to support policy to incorporate climate risk into stress testing. A March 2022 memo from the Office of the Comptroller of the Currency (OCC) shows that Citi, as constituents of the Bank Policy Institute, met with the OCC to outline “challenges” to its draft principles for climate-related financial risk management.

Industry Association Governance: Citi has disclosed membership to some trade associations and listed some areas of engagement with associations on sustainable finance policies, but this disclosure is not comprehensive.

Summary of Citigroup's Climate Governance, Targets and Policies

Governance: The board has oversight of the organization’s approach to climate-related risks and opportunities, and there are clear processes in place to ensure the board is informed and monitors the progress of climate-related issues. Senior management across Citi are assigned clear climate-related responsibilities. Since its inaugural TCFD report in 2018, Citi’s climate change governance has evolved to include roles and committees such as a Chief Sustainability Officer, Head of Climate Risk, and Climate Risk Working Group. This continued in 2021 with Citi's newly formed Global ESG Council.

Strategy: Citi has defined some of the climate-related risks it considers relevant to its business operations over different time horizons, however, it does not appear to have disclosed on the climate related opportunities it is considering over different time horizons. It has numerous examples of how it has considered the impact of climate-related risks and opportunities on corporate strategy planning.

The organization has comprehensively tested the resilience of its business strategy to climate-related risks and opportunities. It has tested multiple scenarios for physical and transition risks, including transition analysis on the utilities sector using 1.5°C, 2°C, and 4°C scenarios, and it has assessed short and long term weather impacts on its facilities, commercial real estate, and agricultural sector.

Risk Management: Citi has some disclosure around the processes used for identifying and prioritizing climate-related risks. For example, it incorporates climate-related risks into assessments of 7 risk categories in its risk taxonomy of: credit, market, liquidity, operational, strategic, compliance, and reputational risks. It is transparent about the processes used to manage climate-related risks, which includes an ESRM Policy.

Climate risk has integrated into Citi's overall risk management approach in various ways including integrating climate into the organization's oversight and governance structure. It is an 'emerging risk' within Citi's risk governance framework and is a key pillar in Citi’s 2025 Sustainable Progress Strategy.

Metrics and Targets: The organization is transparent about key metrics used to measure and manage climate-related risks and opportunities; however, calculation methodologies are not always provided. Citi discloses Scope 1, Scope 2, and some relevant Scope 3 emissions data as well as its credit exposure to climate-relevant sectors. In 2020 it joined PCAF and has committed to disclosing financed emissions using its methodology. In its 2021 TCFD report, it began disclosing its financed emissions and calculated the baseline emissions for its energy and power portfolios.

In March 2021, Citi announced a target to achieve Net Zero by 2050. In April 2021, it became a founding member of the Net Zero Banking Alliance. Citi outlined its initial 2030 targets in its 2021 TCFD report which includes a 29% reduction in absolute emissions for its energy portfolio and a 63% reduction in emissions intensity for its power portoflio for its corporate lending activities .

Technology Positions: Citi is phasing out it's financing of mining companies deriving ≥25% of their revenue from thermal coal mining and plans to reduce exposure to these companies to zero by the end of 2030. However, it has not ruled out all project financing. Citi’s updated 2021 coal policy shows it is promoting steep reductions for the role of coal in the global energy mix that appears to align with IPCC timelines. After 2030, it will no longer provide financing for operations in OECD countries unless the share of power generation from coal-fired plants is less than 5% and the same expectations are applied for operations in non-OECD countries by 2040.

With regard to natural gas, Citi has set exclusionary policies for exploration and production in the Arctic Circle. However, it will continue to provide financing assuming the client meets due diligence. Citi appears to have a similar position on oil investments, enhancing its review process for clients with oil sands operations and those utilizing fracking.

Citi appears to have no clear position of the role of nuclear in the energy mix, but it appears to support nuclear given that clients meet essential safety standards. Citi has communicated support for a transition to a low-carbon economy and has increased its financing of renewables through its $250 Billion Environmental Finance Goal.

Summary of Citigroup's Stewardship of Investee Companies

Citigroup does not appear to be actively engaging companies around climate change. InfluenceMap has not been able to find evidence or examples for company engagements, AGM voting records, nor rationale for voting decisions. However, Citigroup has stated that it aims to engage with companies on the transition to a low carbon economy. Citigroup uses a clear framework and strategy, including milestones and escalation, to manage climate issues in its sustainable finance activities. However, it is unclear if similar frameworks are used in other business areas, such as asset management. As Citigroup does not disclose details of company engagements, it is unclear if it has driven material changes in company behavior or business models. Similarly, it is unclear if it engages companies on their climate policy influence. Citigroup takes part in a number of collaborative investor initiatives that engage on ESG reporting and disclosure across various business areas.