Citi’s ESRM Policy has its origins in its co-founding the Equator Principles in 2003, a credit risk management framework for banks for determining, assessing and managing environmental and social risk for project finance and infrastructure projects. The process to implement and report against the Equator Principles has been fully integrated into Citi's ESRM Policy, credit policies and environmental reporting. In adopting the Equator Principles, a financial institution agrees to provide loans only to those projects whose borrowers can demonstrate their ability and willingness to comply with comprehensive processes aimed at ensuring that projects are developed in a socially responsible manner and according to sound environmental management practices.

The ESRM Policy applies across the firm any time one of the following criteria is met:

1. A transaction above relevant financial thresholds for the financial product type that has an identified use of proceeds directed to a specific physical asset or project (see chart below). For such review, the ESRM Policy applies the Equator Principles. This chart provides an illustrative summary of steps taken in a typical Citi project-related finance transaction.

2. Any client relationship covered by one of Citi’s ESRM Sector Standards (on coal mining and coal-fired power, commercial firearms, forestry, military equipment, oil and gas, nuclear power and palm oil – see below). General corporate purposes transactions or client relationships subject to the ESRM Policy are subject to corporate-level review of their policies regarding environmental and social issues, as well as a review of their track record, to assess client commitment and capacity.

3. Client relationships flagged as ESRM watchlisted due to elevated environmental, social or reputational risks associated with, for example, the ESRM Areas of High Caution, controversial projects or industry lagging policies and performance on environmental or social issues. Citi’s ESRM unit will conduct enhanced due diligence on the relevant risks identified for these clients, prioritizing them for engagement on ESRM issues.

In addition to transactional due diligence, the ESRM Policy also includes specific Policy Prohibitions for activities Citi will not finance. Read more information on Citi's ESRM Policy below:

Citi's environmental and social due diligence is commensurate with the nature, scale and stage of a proposed transaction, and with the level of environmental and social risks and impacts. At the marketing stage, when the viability of deals is first being explored by banks, Citi’s ESRM unit works closely with bankers to characterize the magnitude of potential impacts associated with a transaction using criteria in part defined by the International Finance Corporation (IFC) and to screen for any environmental, social or reputational risks associated with the transaction. These categories include:

• Category A — use of proceeds is likely to have potential significant adverse social or environmental impacts that are diverse, irreversible or unprecedented;
• Category B — use of proceeds is likely to have potential limited adverse social or environmental impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures;
• Category C — use of proceeds is expected to have minimal or no social or environmental impacts; and
• Category GR — “general review,” use of proceeds are directed to multiple projects with varying risk levels.

For transactions in emerging markets, projects are assessed against the issue-based IFC Performance Standards and the 63 sector-specific IFC EHS Guidelines.

Citi does not do business with companies when our due diligence indicates that they are active in the following activities:

• Production or activities involving human trafficking or harmful or exploitative forms of forced labor, defined as all work or service, not voluntarily performed, that is extracted from an individual under threat of force or penalty;
• Production or activities involving harmful or exploitative forms of child labor. Harmful child labor means the employment of children that is economically exploitive, or is likely to be hazardous to, or interfere with, the child’s education, or be harmful to the child’s health, or physical, mental, spiritual, moral or social development;
• Illegal logging;
• Production or trade in any product or activity deemed illegal under the host country laws or regulations (including those ratified by host countries under international conventions and agreements);
• Production or trade in wildlife or products regulated under CITES (the Convention on International Trade in Endangered Species of Wild Fauna and Flora);
• Drift net fishing in the marine environment using nets in excess of 2.5 km in length.

Furthermore, Citi will not provide project-related financial services for the following:

• New thermal coal mines or significant expansion of existing mines;
• New coal-fired power plants or expansion of existing plants;
• Oil and gas exploration, development and production in the Arctic Circle;
• Projects that negatively impact the Outstanding Universal Value of UNESCO World Heritage Sites;
• Production or shipment of cluster munitions
• Mining projects that utilize submarine waste disposal.

Consistent with the precautionary principle of “do no harm,” Citi recognizes that there are certain Areas of High Caution that require special attention, focus and respect. Referencing national laws, the UN Guiding Principles on Business and Human Rights, and, for emerging markets, the relevant IFC Performance Standards, Citi only proceeds with transactions that impact these areas after a thorough and judicious assessment of impacts and risks, and confirmation that mitigation measures have been or will be designed to comply with Citi’s policies and standards. In these cases, Independent Review of social and environmental assessment documentation by a qualified independent consultant with the relevant expertise may be required, as determined by the ESRM unit, to evaluate whether risks and impacts are being appropriately managed. These Areas of High Caution include, but are not limited to the following thematic areas, described in more detail in the Environmental and Social Policy Framework:

• Critical Habitat, Areas of High Conservation Value and Significant Cultural Heritage Value
• Conflict Risk
• Elevated Human Rights Risks
• Indigenous Peoples
• Large-scale Resettlement

Citi recognizes that there are a number of important areas that require increased attention via sector-specific standards or guidance. To address this, our ESRM Policy incorporates several sector-specific standards, which are described in greater detail in the Environmental and Social Policy Framework:

• Coal Mining

• Coal-fired Power Generation

• Commercial Firearms

• Forestry

• Military Equipment

• Nuclear Power

• Oil and Gas

• Palm Oil

With our global reach, we have the ability to influence decisions related to human rights issues across sectors and around the world. For that reason, our work to respect human rights touches all aspects of our company. As outlined in our Statement on Human Rights, we have policies and practices to protect our employees, provide guidance to our suppliers and inform our business decisions, including what we choose to finance. We conduct risk analysis, due diligence and stakeholder engagement to integrate human rights considerations across our business. Human rights are a key component of our Environmental and Social Risk Management activities and an important consideration in our financing decisions, particularly for the most salient human rights risks related to our clients activities — those that pose the greatest risk to people. While our formal risk management processes give us more leverage when we are directly financing a project, we also identify and address human rights risks that could arise across our value chain and impact various stakeholders. Citi has longstanding policies, procedures and programs to address these and other issues, including systemic challenges like modern slavery and climate change.

Modern Slavery
Across our operations, in our supply chain and in our lending activities, we seek to avoid the risk of being linked through our business relationships to any form of modern slavery, including forced labor or human trafficking. As an employer, we have instituted the policies reflected in our Code of Conduct to promote the respectful treatment of our employees. Citi’s Requirements for Suppliers and Statement of Supplier Principles communicate to our suppliers our expectation that they have policies addressing practices constituting forced labor and child labor.

We also evaluate all clients for risks related to modern slavery through our Global Anti-Money Laundering Program and Know Your Client protocols. In addition, some sectors we finance or procure from can, in certain geographies, be associated with a high prevalence of risk indicators of human trafficking or forced labor. Citi will not provide financing when our due diligence indicates that the client is actively using forced labor or harmful or exploitative forms of child labor in their own operations, or if the relevant labor forces are at risk of being subjected to human trafficking. Citi publishes an Annual Statement on its efforts to combat modern slavery in compliance with the UK Modern Slavery Act (2015) that is approved by the boards of directors of all relevant Citi UK entities and our global board of directors and signed by our CEO.