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Citi targets $250bn environmental financing by 2025, as Moody's unveils science-based targets

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Edie
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Citi’s so-called ‘environmental finance’ goal forms part of a new five-year sustainable progress strategy, which it claims will make it “the world’s leading bank in driving the transition to a low-carbon economy” in a socially just manner.

It commits Citi to providing $250bn in loans and grants to activities in renewable energy, clean technology, nature conservation, green buildings, energy efficiency and low-carbon transport within a five year period – up from the $164bn (£126.3bn) it provided for these sectors between 2014 and 2019.

The pot will also be spent on projects working to bring about a circular economy and to make the agri-food sector, which accounts for 70% of freshwater use and 23% of man-made greenhouse gas emissions, more sustainable. These fields have been added to Citi’s definition of “environmental finance” in recognition of the fact that “the production of materials and food, and the management of land, reflect major sources of emissions”. Recent research from the Ellen Macarthur Foundation concluded that 45% of man-made emissions are linked to current linear models of consumption. 

Elsewhere, the five-year strategy includes commitments to source 100% renewable electricity for Citi’s direct operations by the end of 2020, and for the bank to “deepen” its climate risk analyses and disclosures.

On the latter, Citi has been reporting in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations since 2018. The new strategy will see it complete the TCFD’s scenario analysis exercise for a broader range of warming scenarios, as well as measuring and disclosing the climate impact of its portfolio. It has also followed the likes of Morgan Stanley and Natwest Group in joining the Partnership for Carbon Accounting Financials (PCAF), a global framework aimed at aligning finance firms’ portfolios with the Paris Agreement.

Citi said in a statement that these moves will “inform how Citi analyses, engages and collaborates with our clients going forward”. The firm has said it will not pursue aggressive divestment strategy, with chief sustainability officer Valerie Smith writing in a LinkedIn blog: “We will… continue to focus on helping our clients across all sectors, no matter where they are in their own sustainability journeys, to transition to more sustainable business models and practices that will advance our progress towards a low-carbon economy.”

Divestment has been a big talking point in the finance sector this week, with Government-backed pension scheme Nest setting out plans to divest from thermal coal, oil sands and Arctic drilling by 2025 – seemingly against the recommendations of the UK’s Pensions Minister Guy Opperman.

Credit ratings and carbon offsetting

In related news, American financial services major Moody’s Corporation has pledged to halve its direct (Scope 1) and power-related (Scope 2) emissions by 2030, against a 2019 baseline, as part of new Paris-aligned climate targets.

In order to reach its Scope 2 goal, Moody’s will switch to 100% renewable electricity for the entirety of its global portfolio, up from 11% in 2019. It says it will increase contracts with utility suppliers who offer renewable-only tariffs where possible and, elsewhere, purchase renewable energy certificates equivalent to its consumption.

Elsewhere, Moody’s new commitments include a pledge to reduce Scope 3 (indirect) emissions by 15% by 2025, also against a 2019 baseline. The firm’s main sources of Scope 3 emissions are business travel, employee commuting and the supply chain. On the latter, Moody’s is striving to have 60% of its suppliers by spend having set science-based targets of their own by 2025.

Moody’s has been offsetting the entirety of its Scope 1 and 2 emissions since 2018 but said that it must go further and faster. In addition to the new goals, it has set out plans to retroactively offset all emissions generated by the firm since it first became a publicly listed company in September 2000. Similar offsetting plans have recently been launched by the likes of Microsoft.

“Contributing to an environmentally sustainable global future is a key business objective for Moody’s,” the firm’s chief financial officer Mark Kaye said.

Author: Chetanya Mehra