February 25, 2004

Citigroup Comes Clean: World's Largest Bank Adopts Landmark Environmental Policy

by Ted Rutland

The Dominion - http://www.dominionpaper.ca

In a surprise announcement on January 22nd, Citigroup signaled its intention to adopt a comprehensive environmental policy that even the company's staunchest critics are calling "the most significant environmental commitment to date in the financial services sector."

Citigroup, the world's largest financial services company, has been criticized in recent years for providing financial backing to a long list of ecologically and socially destructive projects around the world. The company's involvement with the Three Gorges Dam in China and the monolithic Chad-Cameroon oil pipeline in Africa, in particular, have drawn the ire of several significant Non-Governmental Organizations (NGOs).

The new environmental policy, announced at a press conference at the headquarters of Rainforest Action Network (RAN), commits Citigroup to deny funding for any and all logging operations in tropical rainforests - a first in the financial services sector. Citigroup must also apply stringent prohibitions to guard against investment in illegal logging operations, and place strict restrictions on involvement with other extractive industries operating in sensitive ecosystems around the world. The policy covers all future lending and financing, but will not be applied retroactively to current Citigroup investments.

To combat climate change, the policy calls for Citigroup to curtail its emissions of greenhouse gases and strive to reduce the emissions of its lending portfolio by helping clients finance energy efficient technologies and renewable energy projects. In its annual Corporate Citizenship report, the company will report the greenhouse gas emissions from the power sector projects in its lending portfolio using methodologies that are peer reviewed with experts and NGOs. This is the first time that a private bank has offered such data.

"We aspire to operate according to the highest standards in every arena in which we do business, and the environment is no exception," said Charles Prince, Chief Executive Officer of Citigroup. "We believe we can make a difference by holding ourselves accountable for our own impact on the environment, by embedding our commitment to environmental responsibility in our lending practices, by embracing sustainable business opportunities, and by engaging in the public domain on these issues to help foster solutions to often very thorny questions."

The new policy is a response to an impressive three-year campaign by Rainforest Action Group and a broad coalition of environmentalists, human rights activists, and socially responsible investment groups. The campaign included television advertisements with Susan Sarandon and Daryl Hannah calling on customers to cut up their Citi credit cards, and print ads that ask, "It's 10:00 p.m. Do you know where your money is?" below photos of the ecological and social destruction caused by Citi-backed projects.

The coalition focused, from start to finish, on attaching a financial cost to the company's harmful activities by inspiring consumer boycotts and urging shareholders to sell off their Citigroup shares. "We saw vulnerability in Citigroup's desire to be the best-known consumer bank in the world," says RAN's Erick Brownstein. Symbolic of RAN's focus on the financial implications of malfeasance, the campaign was launched at Citigroup's annual shareholders meeting in the spring of 2001.

Following the money, from damaging projects to their source, has become the mantra of the global justice movement in recent years. Rather than shaming particular governments or singling-out every objectionable corporation, many NGOs and activists now concentrate on cutting off the money supply to projects deemed harmful - no matter who carries them out - by urging financial institutions to adopt ecologically and socially sensitive policies around lending and other types of project financing.

Government-affiliated financial institutions like the World Bank and International Monetary Fund (IMF) were the early targets of this strategy because of their role in imposing neo-liberal, or "free market", economic policies upon poor countries and financing an endless string of misguided resource-extraction, energy, and transportation mega-projects. But private financial institutions have since overtaken, by far, the World Bank and IMF as the leading financiers of Third World development.

In the 1980s, roughly 80% of the money flowing to Third World countries came from governments and government-affiliated institutions. Today, it is corporations, not governments, which account for 80% of money flows to the Third World, and financial services companies regularly fund projects that even the World Bank deplores. As Michelle Chan-Fishel of Friends of the Earth puts it: "It's increasingly clear that the driver of development is no longer the World Bank."

Though Citigroup now has a strong environmental policy, few other financial institutions have taken such a step. Financing for destructive projects, in other words, is unlikely to dry up anytime soon. Fortunately, Rainforest Action Network seems intent on changing the entire financial services industry. After a successful end to its Citigroup campaign, RAN is now challenging "The Liquidators" - top US financial services companies lacking environmental standards - to "meet or beat" the terms of Citi's environmental policy.

Citigroup's policy is significant, not because of the small changes it will affect today, but because of the larger changes it could bring about later on. Its importance lies in the message it sends to the financial services industry. "Citigroup's new environmental initiatives signal the beginning of an ecological u-turn in the global marketplace," says Michael Brune, executive director of Rainforest Action Network. "This is a wake up call to Wall Street as well as Washington."