Citi lends billions of dollars of capital to a wide variety of companies and projects, many of which have potential environmental and social impacts. We take a comprehensive approach to risk analysis, evaluating potential impacts at the transaction level as well as monitoring clients and projects that fall within highrisk sectors, such as forestry, palm oil and coal mining. Where there are gaps, we work to clarify project details and engage with clients to manage environmental and social risks. In addition, our Environmental and Social Risk Radar Report helps us proactively scan for emerging risks.
Citi is one of the 17 banks that financed the Dakota Access Pipeline (DAPL) project an underground oil pipeline in the U.S. from North Dakota to Illinois. Construction of the pipeline raised concerns and spurred protests by Indigenous Peoples and environmentalists as well as many others who were concerned about the project and its potential impact. Citi recognizes the importance of the issues they have raised and will learn from this experience to improve our approach to due diligence on social risk, including on issues related to Indigenous Peoples.
When first approached to work on this project, Citi conducted careful due diligence under our ESRM Policy and the Equator Principles, including closely reviewing the Environmental Assessment report. The banks engaged an independent consultant to review the permitting and approval process to confirm compliance with U.S. laws and regulations. Following this review, we determined that the project met our ESRM Policy and the Equator Principles.
As the objections of the tribal and other stakeholder communities to the project escalated, Citi realized the need to directly engage with the Standing Rock Sioux Tribe, as well as a number of stakeholders from the human rights, academic, investor and non-governmental organization communities, to better understand their concerns. We greatly appreciated the constructive nature of those discussions and used what we learned from them to engage with the project sponsors, expressing our concerns and advocating for steps toward a peaceful resolution. Citi, together with TD bank and on behalf of the other banks, spearheaded the engagement of an independent human rights expert, Foley Hoag LLP, to review the U.S. legal requirements for consultation with Indigenous Peoples, and the project sponsors' policies and procedures in the areas of community consultation, cultural heritage assessment, and security. The review resulted in recommended improvements that project sponsors can make to these policies and procedures in line with international best practice.
Citi took away a number of key learnings from our involvement in this project that will impact how we evaluate such work in the future. Specifically, the current approach to consulting Indigenous Peoples in the U.S. does not align with international standards, and the policies that we have used to evaluate those consultations during due diligence are not sufficient. Accordingly, we are working with a third-party consultancy specializing in community engagement Monkey Forest Consulting to advise us in strengthening our internal due diligence in this area this year. We also intend to continue to maintain a direct dialogue with members of the Standing Rock Sioux Tribe community and other relevant stakeholders on a regular basis going forward.
REDUCED OUR CREDIT EXPOSURE
to coal through the first full year
of implementation of our
COAL MINING STANDARD
Addressed fire prevention practices of
PALM OIL CLIENTS
to assess alignment with
industry best practice by updating our DUE DILIGENCE QUESTIONNAIRES
Piloted an ESRM Watchlist process
to provide an
EARLY WARNING SYSTEM
on clients and transactions that
may pose heightened ENVIRONMENTAL, SOCIAL OR REPUTATIONAL RISK
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