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Sustainability and Innovation at Citi Baruch College April 1, 2008 Val Smith Vice President Environmental Affairs Agenda I. Citi Snapshot II. Environmental and Social Risk Management –Case Study: The Equator Principles III. Climate Change Strategies –Case Study: The Carbon Principles 2 I. Citi Snapshot • Founded in 1812, 400,000 employees, 200 million customer accounts, 100+ countries • 14,500 properties, 94 million square feet • 4 business units: – Global Cards – Consumer Banking – Institutional Clients Group – Global Wealth Management Corporate Environmental Affairs works across business units to: • Develop sustainability strategies • Support and advise the business units on sustainability initiatives • Engage with stakeholder groups 3 II. Environmental and Social Risk Management We know that environmental and social risk can translate to financial risk … In Climate Controversy, Industry Cedes Ground News – England Protest over cement factory plans 4 Ecuador: Soldiers Clash with Oil Protesters Stones Kill 4 Indonesian Officials in U.S. Mine Protest An Economic Boon In Uruguay Becomes A Bane to Argentina II. The Equator Principles • The Equator Principles apply to project finance and are based on the World Bank and IFC Performance Standards and Environmental Health and Safety standards • Citi was a developer and founding adopter, and led the revision of the Principles in July 2006 • A total of 60 financial institutions are signatories, representing approximately 88% of all project finance • Citi expanded the Equator Principles into a broad Environmental and Social Risk Management Policy, which we apply to a wide range of transactions where we know the use of proceeds. 5 II. Equator Principles Case Study • Large infrastructure project in India • Client approached Citi to act as the sole arranger for the project, in part because of our expertise on environmental and social risk • Project involved land acquisition and resettlement of people, including vulnerable groups such as scheduled tribes and castes, and female-headed households • We recommended an independent expert on Indian resettlement to help advise • Citi worked with the client and the independent expert to develop a comprehensive plan for the project to comply with the Equator Principles. 6 III. Climate Change Strategies Feb 2007: Position Statement on Climate Change • Called on U.S. Congress to create a market-based national policy to reduce greenhouse gas emissions • U.S. Policy should: – Recognize early actors – Leverage market forces to establish price signals for GHGs – Reward energy efficiency and emissions avoidance, encourage lowGHG technology R&D – Ultimately fit into a global international framework 7 III. Climate Change Strategies May 2007: $50 billion climate announcement – Demonstrates scale and breadth of client activities – Represents Citi positioning to provide climate expertise and solutions – Includes targets for all primary business units – Includes $10 billion target for reducing our operational footprint NEW YORK, May 8 (Reuters) - Citigroup Inc. (C.N: Quote, Profile , Research), the largest U.S. bank, said on Tuesday it plans to commit $50 billion to environmental projects over the next decade, the biggest commitment from Wall Street to address climate change. 8 III. Climate Change Strategies $50 Billion Announcement – some examples • Comverge IPO – Wireless metering • US Green Bonds – Destiny USA (Syracuse, NY) – 100% renewable • Client advisory – Exposure/mitigation analysis • Sustainable Development Investing (private equity) – Solarfun solar (China) – SCC Sindicatum • Investment Research Reports – Approximately 300 climate-related reports in 2007 9 III. Case Study: The Carbon Principles Feb 2008: Carbon Principles are announced – Enhanced due diligence framework for power financing – Developed by Citi, JP Morgan Chase, and Morgan Stanley – Purpose is to manage climate change risk in electric power finance in the U.S. – Advisors included environmental groups and power companies – Environmental Defense Fund, Natural Resources Defense Council, AEP, CMS Energy, DTE Energy, NRG, PSEG, Sempra and Southern Co. 10 III. Case Study: The Carbon Principles • Growing climate change and CO2 concerns • Federal and state confused policy landscape results in conflict at the project level • Banks held accountable for financing emissions • Need for enhanced process (due diligence) to evaluate new financings • Need for credible response to growing public and environmental concerns 11 III. Case Study: The Carbon Principles • Energy Efficiency – encourage clients to invest in demand reduction • Renewable and low-carbon energy technologies – encourage clients to invest in cost-effective renewables, fuel cells and other low-carbon technologies • Conventional generation – the enhanced diligence process will assess and reflect the risks in the financing considerations for fossil fuel generation 12 III. Climate Change Strategies Stakeholder engagement and partnerships are key to our sustainability strategy Pew Center on Climate Business Environmental Leadership Council (BELC): The BELC is now the largest U.S.-based association of corporations focused on addressing the challenges of climate change. Clinton Climate Initiative: Citi is one of six financial institutions that has committed to arrange US $1 billion to help large cities around the world undertake energy efficiency retrofits of their buildings. World Resources Institute: Citi is a member of the Climate Northeast project, and has worked with researchers at WRI to produce investment research reports Columbia University's Global Roundtable on Climate Change (GROCC): Citi signed a joint statement calling for global action on climate change in February 2007. Citi Foundation Grants: In 2006 Citi provided $1.5 million in climate-related grants. Partners include Rainforest Alliance, E+Co., and World Resources Institute. 13 Questions? Val Smith VP, Citi Environmental Affairs [email protected] 14