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Major banks continue ESG momentum

Earlier this week, CTMfile covered the Deutsche Bank announcement of their new criteria for classifying ESG financing, but they are far from the only global bank to push ahead an ESG agenda in the past week. Both Citi and HSBC have also addressed the topic of sustainable finance and climate solutions.

Citi's five-year sustainable progress strategy 

First, Citi has announced its five-year 2025 Sustainable Progress Strategy to help accelerate the transition to a low-carbon economy. This strategy includes a US$250bn Environmental Finance Goal to finance and facilitate climate solutions globally. This builds on the bank's previous US$100bn goal announced in 2015 and completed last year, more than four years ahead of schedule.

“If there’s one lesson to be learned from the COVID-19 pandemic, it is that our economic and physical health and resilience, our environment and our social stability are inextricably linked,” said Michael Corbat, CEO of Citi. “ESG has been front and centre in Citi’s response to this health crisis, and evermore present in conversations with clients and partners. With our $250 billion goal, we want to be a leading bank in driving the transition to a low-carbon economy, which we anticipate will accelerate as businesses of all kinds shift to a more sustainable future.”

The new strategy, integrated into Citi’s Environmental and Social Policy Framework, will focus on three key areas over the next five years:

  • Low-carbon transition: Citi aims to finance and facilitate an additional US$250bn in low-carbon solutions, in addition to the US$164bn the bank counted toward its US$100 Billion Environmental Finance Goal (2014-2019). This new goal includes financing and facilitating activities in renewable energy, clean technology, water quality and conservation, sustainable transportation, green buildings, energy efficiency, circular economy, and sustainable agriculture and land use. Citi says it will continue to develop financing structures and seek opportunities to scale positive impact in these areas while supporting clients across all sectors in the low-carbon transition.
  • Climate risk: Measuring, managing and reducing the climate risk and impact of Citi’s client portfolio is a key aspect of a low-carbon transition. Citi has worked on climate assessment and disclosure in alignment with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, releasing its first TCFD report in 2018. The bank says it will further test the resilience of its lending portfolios to transition risks and physical risks related to climate change, and continue to disclose in line with TCFD. The global bank will begin measuring the climate impact of its own portfolios and their potential alignment with 1.5 and 2 degree Celsius warming scenarios. As mentioned in the DB story on CTMfile, Citi is also joining the Partnership for Carbon Accounting Financials (PCAF), a global framework for financial institutions to measure and disclose the emissions of lending portfolios and create a global carbon accounting standard for financial institutions. These various efforts will inform how Citi analyses, engages and collaborates with its clients going forward.
  • Sustainable operations: This strategy includes fourth generation operational footprint goals focused on GHG emissions, energy, water, waste reduction and sustainable building solutions. Since 2005 the bank says it has reduced 3,600 GWh of energy use and avoided 2.4 million MTCO2e, equal to the GHG emissions of over half a million cars on the road for a year (equivalency provided by EPA calculator). While climate science requires global CO2 emissions to be reduced by 45% by 2030, Citi is accelerating that timeline with a 45% reduction target in CO2 emissions by 2025. The bank says it expects to meet its goal of sourcing 100% renewable electricity to power facilities globally before the end of 2020. In April, Citi was awarded LEED Platinum certification for its global headquarters in New York, which represents a significant milestone in its sustainable operations.

“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,” said Val Smith, chief sustainability officer of Citi. “Our new strategy unifies these efforts by increasing our commitment to environmental finance, propelling forward our work in climate risk analysis and disclosure and continuing to minimize our own company’s environmental footprint impacts.”

HSBC launches ESG unit

Elsewhere, HSBC has announced the formation of a dedicated ESG Solutions unit that is designed to help clients around the world rebuild and transition their businesses and economies in a more sustainable way, post-COVID-19. The bank says the new unit will more effectively focus its full range of capabilities and expertise in providing clients with ESG-related advice, strategies and financing ideas.

The ESG unit will form part of a new Strategic Solutions Group, within the bank’s Capital Financing & Investment Banking Coverage division. The group will also comprise two other components - one focusing on Corporate Finance Solutions and one on Financial Institutions & Capital Solutions. They will link closely with HSBC’s sector and product bankers to provide strategic advice and financing ideas tailored to specific industries and market sectors.

“Post-COVID, we have a unique opportunity to rebuild our economies and companies so they are more financially-resilient and can transition to more sustainable business models,” said Greg Guyett, co-CEO of Global Banking and Markets at HSBC. “This new group will work with all our bankers across sector, product and geography to assess client needs and deliver actionable solutions which are in the best interests of our clients.”

The Strategic Solutions Group, led globally by Nik Dhanani, who previously headed the global Financing Solutions Group, will comprise around 35 bankers spread across Asia Pacific, Europe and the Americas. In addition to leading the global team, he will lead the FIG & Capital Solutions vertical and oversee the day-to-day activities of the group in EMEA.

The ESG Solutions unit will be led by Jonathan Drew, based in Hong Kong, working with Farnam Bidgoli in London and Julie Bennett in New York. They will be supported by several hundred colleagues who have already engaged with clients on assisting their transition needs. The network will continue to expand to meet the growing financing requirements of clients addressing the challenge of evolving their businesses towards a net zero-carbon world.

“Our new Strategic Solutions Group is going to be a powerful resource for clients looking to deliver resilient growth and build strong balance sheets, allowing them to withstand future shocks and make the changes needed to mitigate climate change,” commented Alexi Chan, global co-head of Capital Markets at HSBC.

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