Utilizing Risk Management to Invest in Sustainability

Utilizing Risk Management to Invest in Sustainability

Citigroup

7. Affordable and Clean Energy 8. Decent Work and Economic Growth 9. Industry, Innovation and Infrastructure 13. Climate Action 17. Partnerships for the Goals Flourish Prize Finalist - For Business as an Agent of World Benefit - Weatherhead School of Management

Overview

Citigroup is an American multinational investment bank and financial services corporation headquartered in New York City. Citigroup's mission is to serve as a trusted partner to their clients by responsibly providing financial services that enable economic progress and growth. Citigroup ensures that they will act responsibly, do everything possible to create the best outcomes, and prudently manage risk. They also strive to earn and maintain the public's trust by constantly adhering to the highest ethical standards. We spoke to Citigroup's Chief Sustainability Officer, Valerie Smith, about their new 2025 Sustainable Progress Strategy. Valerie explained that Citigroup has an impact on serving their clients, providing liquidity, connecting with investors, and moving money through the financial system, but beyond that, they also have the impact of serving society and the environment. Citigroup understands the need for rapid climate action. And they are also aware that because of their power as the world’s most global bank, they have the influence to create an impact amongst clients, partners, and other stakeholders to help the world transition into a low-carbon economy.

Authors

Anna Zagorski

Anna Zagorski

Meredith Teague

Meredith Teague

Brian Sheerin

Brian Sheerin

Paige Walker

Paige Walker

Ryan Steffens

Ryan Steffens

Kate Whitehall

Kate Whitehall

School

Loyola Marymount University

Loyola Marymount University

Professor

Jeff Thies

Jeff Thies

Innovation

Citigroup’s innovation lies in its ability to finance environmental solutions and activities to reduce the impact of climate change globally. In 2015, Citigroup announced a commitment to finance $100 billion towards impacting seven of the seventeen Sustainable Development Goals in ten years. While their investments would impact all seventeen UN Sustainable Development Goals, Citigroup focused their efforts on included gender equality, affordable and clean energy, decent work and economic growth, industry, innovation and infrastructure, sustainable cities and communities, climate action, and partnerships for the goals. Citigroup surpassed this financial goal in only four years, and rather than resting in their accomplishment, Citigroup created a bigger and more difficult target of financing these goals with $250 billion in only five years with a focus on transitioning to a low-carbon economy, reducing climate risk, and improving their sustainable operations. This innovation has proven to be a success for Citigroup due to their strides in leadership in sustainability and banking and their commitment to transparency and client support.

Citigroup’s Chief Sustainability Officer, Valerie Smith, explains that “One of our challenges is that we are a significant financier of traditional higher carbon risk companies, so we have high exposure to those companies, and increasingly we’re asked about those relationships by tech companies and other clients as a part of wondering about our ability to perform for them in terms of our environmental strategies.” Despite working with companies in fields that traditionally operate less sustainably, Citigroup has been able to go as far as surpassing their goals and prove to be leaders among both banks operating sustainably and global organizations in general.

Citi’s 2025 Sustainable Progress Strategy establishes them as a sustainability leader in the financial and banking industry. Citi’s goal is to develop financing structures that help create circular economies, green buildings, renewable energy, sustainable transportation, and water conservation in their efforts to move towards a low-carbon economy. Citigroup also addresses climate risk by including it in their risk and governance framework and engaging with their clients about ways in which they can address climate risk in their own risk management. Additionally, Citi has committed to reducing its total waste by 50% and greenhouse gas emissions by 45% by 2025 ("Environmental and Social Policy Framework").

Citi is consistently learning from its previous strategies and innovating its environmental financing strategies by relying on their resources. Valerie Smith explained that the team went back to the basics before they established these new goals. They referenced stakeholder dialogues to determine their main criteria for this new strategy, and they analyzed their previous 100 billion dollar goal to see which areas of investing contributed the most impact. When they developed the plan, they also considered which markets would be growing, which they could determine because of their unique risk resources.

Utilizing Risk Management to Invest in Sustainability

Inspiration

The inspiration for the ambitious 2025 Sustainable Progress Strategy stems from Citigroup’s awareness of the pressing need for climate action and its own leverage in the global economy. Citi understands that because they are the world's most global bank, they have the opportunity to use their influence with clients, partners, and other stakeholders to help the world transition into a low-carbon economy. Due to Citi’s unique experience with risk management and relationship with their clients around the world, Citi feels a responsibility to allocate their internal and external resources towards making the world more sustainable, as well as establishing a standard for other organizations in their industry. Valerie Smith spoke with us about how Citigroup learns from and establishes standards for those in the financial and banking industry; “What we do might inspire [our competitors] to take the extra steps, and what [our competitors] do inspire us to take the bigger steps.” Therefore, Citigroup found inspiration from its unique position in the global economy and inspiration from its competitors.

Overall impact

From an operational perspective, Citigroup has an impact of serving their clients, providing liquidity, connecting with investors, and keeping the flow of money moving, but beyond that, they aim to serve society and the environment as well. Their mission is to be a trusted partner to their clients, and they do this by safeguarding assets, making payments, lending money, and accessing capital markets to serve their clients better. They are optimizing their operations and valuing ethical standards as they conduct their business and support communities. Their operation and business are supported by their sustainability strategy, creating an optimal cohesiveness while also increasing efficiency, integrity, and decreasing cost.

Citigroup is continually growing and pushing its components to expand the bounds of what it means to be a financial services company. At this point, they are challenging other companies to serve clients and stockholders better and make the world a better place. Inside Citigroup, we see that they can do this because they support and empower a collaborative environment. Valerie Smith mentioned that several teams within the firm were involved so that the 2025 Sustainable Progress Strategy came to fruition. She mentioned that collaboration and learning from the previous strategy was key throughout the development stage of their new sustainability goals. Citigroup is holding itself accountable to maintain the trust of the public and stockholders, manage financial risk as best as possible for all involved, and learn from all mistakes. Not only is Citigroup a powerful bank in the United States, but they are also one of the biggest banks worldwide. For 200 years, they have worked to support and bring together millions of people.

Business benefit

For Citigroup, the benefit that stems from their sustainable practices ties into their mission to providing responsible financial services to promote growth and economic progress. Citigroup depends on its consumers to stay with its banking services for long-term growth and progress. As society has become more aware of climate risk and social responsibility, Citigroup has utilized strong, sustainable practices to sustain and evolve its relationship with investors, clients, and other partners. Citigroup’s efforts benefit further as they work with companies on a wide spectrum of sustainability to advise more sustainable practices to make the widest impact.

Social and environmental benefit

With Citigroup’s goal of being a leading bank in the shift toward a low-carbon, circular economy, their end goal is to help support a more sustainable future with their financing activities in their recent environmental financing goal pledge of $250 billion. A key action in their Environmental and Social Policy framework is to measure, manage, and reduce climate risk in their portfolio of clients, which environmentally benefits from their goal. While the measurement for the success of the 2025 Sustainable Progress Strategy is yet to come, the social and environmental impacts of Citigroup’s financing efforts are evermore present today through this pandemic.

Since July, Citi has committed over $100 million to support communities worldwide in COVID-19 relief efforts. Additionally, Citi has supported 75,000 of their employees worldwide with additional financial compensation benefits in light of the pandemic, signifying a strong duty of social care to the overall well-being of their employees. Aside from benefiting from social and environmental causes externally, Citi’s social impacts have positively affected its internal culture. Valerie Smith stated, “We are seeing a true integration of sustainability into our businesses with the formation of additional sustainability and ESG-focused teams and increased enthusiasm and advocacy across Citi.” Smith explained how this enthusiasm for sustainability within Citigroup’s work culture is key for their upholding their purpose in financing for positive environmental and social impact and minimizing Citi’s own environmental impacts as a company.

Sources:

“Citi Announces New Five-Year Sustainable Progress Strategy to Finance Climate Solutions and Reduce Climate Risk.” Global Investment Bank and Financial Services, www.citigroup.com/citi/news/2020/200729a.htm.

“The Citi Blog - Banking in 2030: Citi & the Sustainable Development Goals.” Citi Blog, blog.citigroup.com/2017/09/banking-on-2030-citi-amp-the-sustainable-development-goals/.

Aziz, Afdhel. “Citi Announces $250 Billion Commitment To Finance Climate Solutions And Reduce Climate Risk: An Interview With Val Smith, Citi Chief Sustainability Officer.” Forbes, Forbes Magazine, 3 Sept. 2020, www.forbes.com/sites/afdhelaziz/2020/09/03/citi-announces-250-billion-commitment-to-finance-climate-solutions-and-reduce-climate-risk-an-interview-with-val-smith-citi-chief-sustainability-officer/?sh=819cb3733e0c.

"2019 Annual Report." Citigroup. https://www.citigroup.com/citi/investor/quarterly/2020/ar19_en.pdf?ieNocache=692

“2025 Sustainable Progress Strategy.” Citi, www.citigroup.com/citi/sustainability/.

"Environmental and Social Policy Framework." Citi. Jul. 2020, https://www.citigroup.com/citi/sustainability/data/Environmental-and-Social-Policy-Framework.pdf?ieNocache=902

“Citi and Citi Foundation Reach Over $100 Million in Commitments for COVID-19 Community Relief and Economic Recovery Efforts.” Global Investment Bank and Financial Services, www.citigroup.com/citi/news/2020/200629a.htm.

Interview

Valerie Smith, Chief Sustainability Officer

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Citigroup

Citigroup

New York, NY, Worldwide

Business Website: https://www.citigroup.com/citi/

Year Founded: 1812

Number of Employees: 10000+

Citigroup is an American multinational investment bank and financial services corporation headquartered in New York City. Citigroup's mission is to serve as a trusted partner to their clients by responsibly providing financial services that enable economic progress and growth. Citigroup ensures that they will act responsibly, do everything possible to create the best outcomes, and prudently manage risk.