Responsible business practices are not only the backbone of our company's success, but imperative to protecting the broader financial system and the communities in which we live and work. It starts with a culture of ethics and integrity delivered by a diverse, skilled workforce committed to serving our clients. Whether we are protecting our customers' privacy, respecting human rights, engaging with our suppliers or assessing and addressing the environmental and social risks of the projects we finance, our goal is always to earn our customers' trust through responsible, ethical practices.
Citi adheres to internationally recognized environmental and social principles and practices, as well as our own set of sustainability policies, statements and commitments. This approach provides balance in the way we manage the environmental and social impacts of our business. Citi's Environmental and Social Policy Framework describes Citi's key internal environmental and social policies, programs and initiatives globally and guides our daily business decisions. It also provides greater detail on information shown in this website.
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. We have specific policies and codes of conduct in place, including our Statement on Human Rights, that 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 activities to ensure human rights considerations are taken into account 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.
Citi's ESRM Policy serves as a model of non-traditional risk management, requiring a rigorous review of certain financial transactions where the use of proceeds is known. Each ESRM covered transaction receives the appropriate ESRM risk category, based on the IFC's environmental and social risk categorization criteria (see box). Category A and B transactions require review and advice by the ESRM unit, and transactions with the highest potential reputational risk require additional elevated review by senior credit officers and Global Public Affairs.
Citi's ESRM Policy incorporates our commitments under the Equator Principles for project-related lending. This chart provides an illustrative summary of steps taken in a typical Citi project-related finance transaction. The ESRM Policy covers all sectors with potential environmental and social impacts, and includes specific Sector Standards on forestry, palm oil, shale oil and gas, oil sands, coal mining and nuclear power. For transactions in emerging markets, projects are assessed against the issue-based IFC Performance Standards and the 63 sector-specific IFC EHS Guidelines.
Read more information on Citi's ESRM Policy:
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. We group proposed transactions into three categories:
Category A: Transactions with potential significant adverse environmental and social risks and/or impacts that are diverse, irreversible or unprecedented
Category B: Transactions with potential limited adverse environmental and social risks and/or impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures
Category C: Transactions with minimal or no adverse environmental and social risks and/or impacts.
The ESRM Unit acts as a technical resource and advisor for Citi senior management and staff on environmental and social risk issues. The Unit is responsible for review, advice, and consultation on new transactions across the firm; internal ESRM training; policy implementation, tracking and reporting; and partnering with Citi Corporate Sustainability on external outreach to non-governmental organizations (NGOs), socially responsible investors (SRIs), other Equator Principles Financial Institutions, and the media.
ESRM Covered Transactions include:
| TRANSACTION / PRODUCT TYPE | REQUIRED THRESHOLD AMOUNT |
|---|---|
| Equator Principles ("EP") Project Finance Transactions | Project capital costs: US$10 million |
| EP Project Finance Advisories | Estimated project capital costs: US$10 million |
| EP Project Finance Transactions for Existing Projects and Refinancings | Project capital costs: US$10 million |
| EP Bridge Loans | Total facility amount: US$10 million when takeout will be project finance, US$100 million when takeout will be EP Project-Related Corporate Loan |
| Corporate and Government Loans (Note: includes the following sub-category subject to EP) | Total facility amount: US$50 million (in aggregate) for ICG loans and US$25 million for Commercial Bank loans |
| EP Project-Related Corporate Loans | Total facility amount: US$100 million (in aggregate) where majority of proceeds is related to one project |
| Official and Export Agency Loans | Total facility amount: US$50 million |
| Acquisition Finance | Total facility amount: US$50 million (in aggregate) |
| Debt Securities Placements or Underwritings (Bonds) | Underwriter or arranger of debt securities placements or underwritings of US$50 million (in aggregate value) |
| Equity Underwriting Transactions | Underwriter, arranger or placement agent for the selling of equity securities of US$50 million (in aggregate) |
| Equity Investment | Firm (Citi) equity investment of US$5 million |
| LCs, Bid Bonds and Performance Bonds | Relevant instruments of US$50 million (in aggregate) |
Citi has a long history of founding and adopting industry-leading sustainability initiatives, including the Equator Principles (2003). These initiatives have fundamentally and positively changed the way financial institutions approach environmental and social risk. The process to implement and report against the Equator Principles has been fully integrated into Citi's ESRM Policy, credit policies and environmental reporting.
The Equator Principles are a credit risk management framework for banks in determining, assessing and managing environmental and social risk for project finance and infrastructure projects. Citi was a co-founder of the Equator Principles (EPs) and continues to lead in their evolution and development by serving on the EP Association Steering Committee. We were elected Chair of the Steering Committee for the period 2010-2012, were a key driver of the 2013 update which expanded the scope of EP to corporate loans and bridge loans. Considered the gold standard for managing environmental and social risk in financing major projects, the EP Association membership has grown from 10 initial members at the 2003 launch to more than 80 financial institutions from around the world. 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 Equator Principles are a core component and backbone of Citi's broader ESRM Policy.
The full text of the Equator Principles and a list of Equator Principles Financial Institutions can be found at www.equator-principles.com.
Please see Citi's 2016 reporting on Equator Principles III implementation.
Citi recognizes that there are a number of important areas that require increased attention via sector-specific policy or guidance that is not available through the IFC Performance Standards, IFC EHS Guidelines or national or internationally accepted standards. To address this, Citi's ESRM Policy incorporates several sector-specific standards, described below and in further detail in our Energy and Power Sector Framework.
Coal Mining
Citi conducts corporate-level reviews for the global coal mining sector, incorporating environmental, social and governance (ESG) performance into our annual portfolio review process. This research helps inform our business with the sector and with individual clients. Citi's credit exposure to coal mining companies has declined materially since 2011. Going forward, we commit to continue this trend of reducing our global credit exposure to coal mining companies. This commitment applies globally to coal mining companies, including those that use mountaintop removal (MTR) methods, and to coal-focused subsidiaries of diversified mining companies. Approval for any financing transactions for coal mining companies requires escalation and senior approval. Citi also has an MTR coal mining Environmental and Social Due Diligence Process, which was first instituted in 2009.
Nuclear Standard
Citi's Nuclear Standard applies to a variety of nuclear related transactions for nuclear power plants, supply of fuel rods, nuclear waste management and storage, and supply of key components, equipment, materials and services. Across the globe, nuclear projects are evaluated against host-country environmental guidelines and must meet related environmental laws, regulations and permits. In emerging markets, these facilities are further evaluated against the international nuclear environmental guidelines that are set forth by the International Atomic Energy Agency (IAEA), including all IAEA fundamental principles, safety and environmental management requirements. All nuclear-related transactions that are subject to the ESRM Policy and are rated a Category A require Independent Review.
Oil Sands and Shale Risk Review Process
Oil sands and shale are increasingly important sources of oil and gas in North America, but their development also includes specific environmental and social risks that need to be identified, mitigated and managed. Citi has developed a risk review process for any client with oil sands operations or unconventional oil & gas operations in shale formations. This review process is not tied to financing specific projects, but done at the corporate level, and updated at regular intervals.
Sustainable Forestry
As a financial institution with business relationships across the forestry sector, Citi is committed to sustaining healthy forests. We assess the risk of impact on forests using our Sustainable Forestry Policy Sector, which includes requirements for independent certification in certain "high risk" geographies.
Sustainable Palm Oil Standard
As a member of the Roundtable on Sustainable Palm Oil (RSPO), Citi requires clients to commit to a time-bound Action Plan to achieve RSPO certification, in accordance with RSPO Principles and Criteria, or an equivalent credible third-party certification acceptable to Citi, and as required by IFC standards.
For many reasons, 2016 was a year not many of us are likely to forget anytime soon. Uncertainty, change and anger were all defining characteristics of 2016, but if I had to summarize the year in a word, it would be AGAINST. Against the status quo, long- serving leaders, and any perceived threats to what people in many places had long considered a predictable and secure future.
While the sources and multiple manifestations of this mood are being analyzed by many, at Citi we think the more important area of focus is: What do we, and should we, stand FOR?
As a company with clients in more than 160 countries and jurisdictions and with more than 200 million customer accounts worldwide, what we stand for is informed by many things. First and foremost, we're guided by our mission to responsibly provide financial services that enable growth and progress.
As part of that mission, we ask ourselves how our own actions and behaviors exemplify what we stand for. Do we hold ourselves to the highest ethical and business standards? What do we do on a daily basis to meet and live up to those standards? And, importantly, what do we do when we fall short? That's the big question that the second section of this report, "HOW WE DO BUSINESS," addresses. It makes clear that Citi stands for diversity in the workplace, requiring our colleagues to adhere to the highest ethical standards, running our operations in an environmentally friendly manner and safeguarding our clients' privacy.
In pursuit of our mission, we also ask ourselves how the work we do with our clients and in our communities around the world demonstrates what we stand for. The efforts detailed in the "SOLUTIONS FOR IMPACT" section are indicative of the many ways we can and do have a positive financial and social impact in the communities we serve. They demonstrate that Citi stands for building inclusive cities, working with governments on critical infrastructure projects, and financing solutions that protect against climate change.
When I think about the sense of uncertainty that permeates the world today, I grow only more committed to identifying and taking action on issues where Citi can use our global scale and expertise to make meaningful contributions. And while we don't have all the answers and can't solve every problem, we can and do stand FOR progress and will continue to do our part to conceive of and contribute to solutions that address some of society's most daunting challenges.
- Mike