Are Citigroup’s green pledges idle rhetoric or a signal of change?
Citigroup’s continued funding of fossil fuel projects in the Amazon rainforest is a particular weakness of its sustainability claims.
By Ellie Kim Fromboluti
November 9, 2022
Citigroup - second largest financier of fossil fuels in the world
Citibank is the third largest US bank. As of December 31, 2021, Citibank had $2.29 trillion in total assets and more foreign branches than any other US bank. Citi has worked hard to tout its global credentials and advertise its efforts toward sustainability and environmental stewardship. Like the seasoned relative we go to for advice about saving for retirement, Citi positions itself as, above all, responsible.
Despite branding itself as a “bank with a brain and a soul,” Citi comes in second only to JPMorgan Chase in terms of fossil fuel financing. Between 2016 and 2021, Citi provided $285 billion in funding to oil and gas projects.
Furthermore, as of April 2022, Citi remains the top financier of oil and gas projects in the Amazon rainforest, estimated at $42 billion in active or recent deals according to preliminary research by the Stand Research Group. Continued funding of fossil fuel projects in the Amazon is a threat to the environment and indigenous rights.
Are these the financial activities of a responsible bank leading global change?
Climate infractions in the Amazon rainforest
The Amazon is a critical habitat for climate change mitigation. Ongoing deforestation and environmental degradation due to oil extraction are pushing the biome toward irreversible damage. Recent research shows that the Amazon absorbs as much as 123 billion tons of carbon annually, but its ability to act as a carbon sink is rapidly diminishing. Protecting the Amazon protects the global climate.
Between 2014 and 2019, Citi poured over $9 billion into fossil fuel projects in Ecuador alone. Citi is one of the top ten underwriters of $2.72 billion in loans to Gunvor Group, a corrupt and dominating force in the oil trade in Ecuador. Corruption drives fossil fuel expansion – meaning deforestation, pollution, and loss of biodiversity – as governments sell advances on oil contracts and take on debt. Beyond Ecuador, Citi is the largest financier of oil expansion in the region and the highest investor in Petrobras in Brazil at $5.6 billion. Not only is Citi’s money fueling devastating pollution, corruption, and infractions of indigenous rights in the Amazon, but its investments put it at a high risk level based on the volatility of its investments.
The list goes on, and there’s no indication that Citi intends to change its path. Although Citi’s recent Environmental and Social policies framework prohibits “oil and gas exploration, development and production in the Arctic Circle,” it remains vague regarding continued fossil fuel investments in the Amazon habitat.
Shareholders are taking note. Two resolutions at this year’s annual general meeting called on Citi leadership to address its infractions in the Amazon and more broadly.
Proposal 7 asked Citi for greater transparency and reporting on its consideration of Free, Prior, and Informed Consent (FPIC), given that many areas in the Amazon are often indigenous territories – and targets for fossil fuel expansion. It received 34% support from shareholders. Proposal 8, a resolution by Harrington Investments, asked Citi leadership to commit to ending fossil fuel funding by the end of 2022. Citi fought to exclude the proposal from the proxy vote based on it being “micromanagement” of the firm. In the end, the resolution received 12.8% support, meaning that it was a serious enough issue to be brought up again in future votes, even if it was not adopted this year.
New CEO, new commitments
In March 2021, Jane Fraser took over as CEO of Citigroup. Notably, she is the first female CEO of a major Wall Street bank (which in itself has promise for “greening” the image and actions of Citi). In her 2022 letter to shareholders, Fraser proclaims a commitment to transition. And some of Fraser’s actions seem to back up that proclamation.
On her first day as CEO, Fraser committed to achieving net zero emissions by 2050, remarking at the Leaders Summit on Climate that this would entail evaluating both emissions related to Citi’s internal operations as well as those of their client portfolio.
Although it falls short of full disclosure, Citi is working to include a portion of its client portfolio emissions in its current Scope 3 reporting in recognition of the significant contribution financed emissions can have on an institution's overall carbon financial footprint (up to 700 times greater than its own operational emissions, according to the Carbon Disclosure Project). Citi reports Scope 1, 2, and 3 emissions in its yearly Global ESG report (latest from 2021 here).
On another positive note, one month after Fraser took the reins, Citi committed $1 trillion to Sustainable Finance by 2030. This includes directing $500 billion in capital to climate solutions – including clean energy, water, transportation, and building. A further $500 billion will go towards non-environmental issues, such as housing, health care, and economic inclusion.
Based on initiatives started by its CEO, Citi seems to acknowledge the inter-relatedness of societal and environmental issues and is making efforts to remain accountable and transparent.
Words vs. actions: Is Citi taking substantive steps to counter climate change?
In its 2021 annual report, Citi positions itself as a global leader in sustainable banking. Social media and other marketing campaigns, such as its Earth day Green Champions initiative in April 2022, likewise tout the bank’s commitment to progress. Fraser has spoken repeatedly about Citi’s commitment to the environment.
Let’s take a closer look at four positive moves Citi has made toward leading the climate transition – along with some of the caveats that come with its commitments.
1) Target to reduce absolute emissions
First and foremost, Citi’s Net Zero by 2050 commitment makes a rare (and hopeful) commitment to monitoring and reducing absolute emissions from funded projects. In contrast, other banks, such as JPMorgan Chase, commit only to reducing emissions intensity, a less stringent measure that easily allows for continued fossil fuel expansion.
Even so, Citi’s absolute emissions commitment does not preclude funding fossil fuel expansion. For example, Citi clients Chevron, ExxonMobil, and Saudi Aramco have big plans for fossil fuel expansion. Thus this commitment falls short of the International Energy Agency (IEA) recommendation to cease all new fossil fuel expansion to hit the 1.5 degree target that aligns with Paris Agreement goals. Further, Citi’s commitment does not include plans for how to monitor the quality of emissions reporting from its clients.
2) Founding member of the Net-Zero Banking Alliance
In another positive move, Citi helped found the Net-Zero Banking Alliance (NZBA). Banks that join the NZBA make an apparent commitment to align emissions associated with their lending and investment portfolios to a net-zero by 2050 pathway and meet certain interim targets along the way in addition to reporting on their progress annually. In theory, this should mean that Citi and the other members of the NZBA pressure clients in carbon-intensive industries to reduce emissions by potentially withholding capital (and diverting it to more climate-friendly companies).
However, in reality, NZBA banks continue giving money (and a lot of it) to Exxon and other fossil fuel expanders. As an example, in 2020, Citi facilitated $7.5 billion in loans to Exxon and provided financing to top oil and gas expanders Qatar Energy, Saudi Aramco, and Petrobras, amongst others.
If this continues, the NZBA’s commitments may constitute mere greenwashing.
3) Phasing out coal
Citi is also the first US bank with plans to phase out coal funding by 2030-2040. Again, this positive comes with some caveats. Currently, Citi’s exclusion criteria for funding apply only to new clients, meaning that existing recipients of funding are held to a less stringent standard.
4) Reduction in fossil fuel funding in recent years
Finally, although Citi’s fossil fuel financing is high – not to be forgotten, it is still the second biggest funder of fossil fuels between 2016 and 2021 – its fossil fuel funding decreased from 2019 to 2020 and from 2020 to 2021. Maybe this is the start of a positive trend.
While Citi’s stance is hopeful, its progress is overstated and its media exceeds its achievements. As with JPMorgan Chase, an important question for consumers is to what extent are the company’s claims backed up by action?
Despite the positives, Citi has continued detrimental activities that undermine its reputation as a climate leader. Put bluntly, Citi continues to fund destruction of the Amazon rainforest, one of the world’s most crucial habitats for mitigating the effects of global warming, and profit from it. Shareholders have pressured Citi to respect indigenous rights and withdraw from fossil fuels, but the bank remains entrenched.
Until Citi exits fossil fuels – particularly in the Amazon region – it just can’t claim to be the leader of the climate transition it wants to be. Consumers should test Citi’s commitments. If you have money with Citibank, consider demanding improvements to its Amazon and fossil fuel policies or move your money to a climate-friendly bank.
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