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 3. BANKING/CREDIT


CITI TARGETS BIG OIL IN BIGGEST STEP AMONG MAJOR BANKS ON CLIMATE CHANGE

Last Updated: Jan. 20, 2022 at 9:13 a.m. ET
First Published: Jan. 19, 2022 at 5:54 p.m. ET
By

RACHEL KONING BEALS


FINANCIAL-SERVICES GIANT SETS RARE ‘ABSOLUTE REDUCTION’ TARGET FOR FOSSIL-FUEL
POLLUTION, BUT WILL HALT OIL-AND-GAS LENDING ONLY AS A LAST RESORT



Citigroup Inc. will be tougher on clients in the oil-and-gas industry, changing
the way the bank asks Big Oil to measure how much pollution their efforts spew
into the air as a requirement for receiving financing while the world tries to
curb global warming.

CitiC said Wednesday in a report that it aims for an “absolute reduction” in
emissions from companies across its energy loan portfolio of 29% by 2030 from
2020. Citi did stress that dropping oil and gas clients if they are deemed to
fall short of such targets would only...

Citigroup Inc. will be tougher on clients in the oil-and-gas industry, changing
the way the bank asks Big Oil to measure how much pollution their efforts spew
into the air as a requirement for receiving financing while the world tries to
curb global warming.

Citi C said Wednesday in a report that it aims for an “absolute reduction” in
emissions from companies across its energy loan portfolio of 29% by 2030 from
2020. Citi did stress that dropping oil and gas clients if they are deemed to
fall short of such targets would only be a last resort.

Other banks have focused on pushing clients to reduce their “emissions
intensity,” a measure of emissions relative to output, instead of just emissions
in general, which “absolute reduction” targets. Some climate activists argue
that emissions intensity is a softer metric that does not go far enough if
global warming is going to be limited to 1.5 degrees Celsius.

Ad


Citi did keep the “emissions intensity” language in its call for the power
sector, targeting a 63% reduction in emissions intensity for borrowers across
that sector. Some analysts have said a mix of energy sources — ranging from
natural gas NG00 to nuclear to wind and solar and the more experimental and
not-yet-scalable green hydrogen — will be needed in the transition years as EVs
and other electric sources put added demand on the nation’s grid.

Citi repeated in the report its aim to achieve net-zero carbon emissions
associated with its financing by 2050, a marker similar to most pledges in the
financial-services space.

Opinion: ‘Net zero’ pledges can amount to greenwashing. This is the better way
to reduce deadly carbon emission



The financial sector has been accused of “greenwashing” by some environmental
groups and lawmakers, who suggest that broad pledges — including cutting
emissions at their own banking centers — carry little water when a funding
pipeline continues to keep fossil-fuel firms pumping oil and gas. Burning fossil
fuels accounted for 74% of U.S. greenhouse gas emissions in 2019, the most
recent year for complete data, according to the Energy Information
Administration.

Major banks, including JPMorgan Chase JPM , Bank of America BAC and Citi, have
invested $3.8 trillion in fossil fuels since the Paris Agreement targeting
global warming was signed in 2015, at least through early last year, according
to tracking by a handful of climate organizations, including the Rainforest
Action Network.

Related: JPMorgan Chase — the oil industry’s bank of choice — will withdraw
support for some fossil fuels



But banking leaders have said regulators must go slow and avoid
one-size-fits-all treatment when it comes to proposed climate-change and
energy-sector financing rules. Sudden disruption to the energy sector poses
bigger risks to the economy, they argue.



Larry Fink, CEO of BlackRock, the world’s largest asset manager, said at a major
U.N. climate conference late last year that lack of financing for oil and gas
could push these concerns to seek more private capital, bringing less investor
and regulatory scrutiny.

Read: Wall Street could crumble under the weight of a ‘carbon bubble,’ these
groups warn



“We will continue to assess our client relationships — a regular part of how we
manage our business — and prioritize partnering on transition strategies before
turning to client exits as a last resort,” Citi CEO Jane Fraser said.

The company is also monitoring the impact on developing countries, where there
may be limited access to energy resources, Fraser said. 

Citi has also vowed to finance $1 trillion in sustainable business in coming
years. 

Read: Citigroup profit falls but beats Wall Street target

Citigroup shares are up about 1.6% over the past year, compared with a 12% gain
for the Dow Jones Industrial Average DJIA over the same span. One popular
energy-sector exchange-traded fund, the SPDR S&P Oil & Gas Exploration &
Production ETF XOP is up 89% over the past year.

See original version of this story


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ABOUT THE AUTHOR

Rachel Koning Beals


Rachel Koning Beals is a MarketWatch news editor in Chicago.





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