Citi Increases Transparency, but Fails to Disclose Clear Net-Zero Transition Plan

NEW YORK – Today, Citi published its latest annual climate-related disclosures report, which reveals for the first time how it is assessing the transition plans of high-emitting clients, and reports the emissions resulting from its capital markets underwriting activities in high-emitting sectors. 

In response to the report, Adele Shraiman, Senior Strategist with the Sierra Club’s Fossil-Free Finance campaign, issued the following statement:

“Yet another year has gone by without ambitious climate action from Citi, which is still one of the world’s largest financiers of fossil fuels. Citi’s latest climate disclosure report reveals what has long been obvious — major oil and gas companies are failing to transition in line with net-zero by 2050. What Citi doesn’t report, however, is how it plans to push these clients to increase their ambition or cut off additional financing. Citi could truly help lead the transition to net-zero — but that requires more than increasing transparency, it requires action.”

Citi reveals the summary results of its assessments of the quality of transition plans of its clients in the energy and power sectors. The report reveals that only 8% of Citi’s clients in the upstream and downstream energy sector are deemed by the bank as having “Strong” transition plans. 71% of energy sector clients have transition plans categorized as “Low” or “Medium Low”. Clients in the power sector fare better, but still only 59% of these are assessed as “strong.”  

Though the results of these assessments do provide some insights into how the bank evaluates the climate plans of its high-emitting clients, Citi has once again failed to provide adequate information on how it plans to actually reduce exposure or transition clients in these polluting sectors in order to meet its own emissions reduction targets. Aligning with the goal of net-zero by 2050 will require Citi to publish clear expectations and timelines for how it will escalate engagement with or cut financing for companies unwilling or unable to transition in line with its commitments.

Also for the first time, Citi has disclosed its facilitated emissions — those resulting from the underwriting of bonds and equities — for the energy and power sectors, following the recently finalized standards from the Partnership for Carbon Accounting Financials (PCAF). Other major US banks, such as JPMorgan Chase and Wells Fargo, have included underwriting activities in their previous emissions disclosures, though based on their own accounting methodologies. Citi reports that its facilitated emissions in 2022 alone from the energy and power sectors were, respectively, 18.4 million and 3.5 million metric tons CO2e. If Citi had also disclosed the more transparent calculation for facilitated emissions, without the 33% weighting recommended by PCAF, the full figures would be 55.2 million and 10.5 million metric tons CO2e for the energy and power sectors respectively.

Unlike some of its peers that have set emissions reduction targets for lending and underwriting, Citi has still not set targets for reducing facilitated emissions. As fossil fuel companies increasingly turn to capital markets to raise new funds, Citi’s continued delay in setting targets to reduce these emissions raises concerns about the credibility of its climate commitments. 

As in its report last year, Citi shows marginal progress toward its emissions reduction targets for the energy sector, originally set in 2021. Citi reports a continued decrease in its financed emissions for these sectors, which dropped from 2020 to 2021, and again in 2022 (the most recent year of reported data). Though this is potentially a sign of progress for Citi, it should be noted, as Citi does itself, that the drivers of reduction in absolute financed emissions are primarily due to an overall increase in the market valuation of companies in the portfolio. Put simply, oil and gas majors’ windfall profits have contributed more to the trend than Citi’s efforts to reach its emissions targets. 

One notable sign of progress is in the financed emissions in thermal coal, which have been cut nearly in half since 2021. Unlike in the oil and gas sectors, Citi reports that this decline is due to a reduction in the bank’s exposure to the thermal coal sector.

BACKGROUND

In November 2022, the Sierra Club’s Fossil-Free Finance campaign released a report analyzing the interim 2030 targets and exclusion policies of the six major U.S. banks, including Citi, revealing that the banks’ commitments fall short of what’s needed to meet global climate goals. The report also establishes recommendations for credible and robust targets and policies. 

In July 2023, the Sierra Club’s Fossil-Free Finance campaign released a report on the role of big US banks in capital markets, revealing a hidden pipeline for fossil fuel financing through the banks’ underwriting of bonds and equities for polluting companies. The analysis raised important questions about how the 6 biggest US banks calculate and report on their facilitated emissions, and made the case for the importance of banks’ capital markets activities in achieving real-world emissions reductions.

The latest annual Banking on Climate Chaos report, released in April 2023, showed that Citi is the world’s second largest financier of fossil fuels since 2016. In that time, the bank has poured over $333 billion into the world’s largest fossil fuel companies. Some of Citi’s largest fossil fuel clients include ExxonMobil and Saudi Aramco, which were recently assessed by Carbon Tracker to be among the world’s least climate-aligned companies.