Citigroup, ready to meet a ten-year $100 billion sustainability goal four years ahead of schedule, named the executive in charge of the initiative to the new position of chief sustainability officer as the company joins a host of banks and big corporations boosting their green bona fides.
Val Smith, 49, who oversaw the $100 billion initiative, was appointed Sep. 9, charged with continuing to work with the company and clients to address their social and environmental impact and push sustainability efforts.
“The new role of Chief Sustainability Officer is a reflection of the importance of this work in shaping our business activities, internal operations and stakeholder engagement,” a Citi spokesman told Karma. Smith reports to Ed Skylar, executive vice president of global public affairs, who reports to CEO Michael Corbat.
Citi joins other big banks and major corporations naming officials charged with overseeing environmental and social impact efforts. UPS, Cargill, LaFargeHolcim, Tyson Foods have all made similar appointments just this month alone. Banks and private equity firms have been pushing green investments, as companies project a positive corporate images as climate change warnings grow more dire.
Corbat called for “radical action” by world leaders to reduce damage to the environment. “I’m a big believer in the combination of the stick and the carrot, and in many ways it’s the carrot that has the ability to get us there,” he said at the third annual Bloomberg Global Business Forum last week. Incentives drive innovation, suggested Corbat, where the punitive ‘stick’ “leads to irrationality of behavior.”
Citi began its $100 billion environmental finance project in 2014, committing that amount to financing climate-friendly projects like water quality or conservation efforts, sustainable transport, green building, clean technology and energy efficiency. Growing demand as climate change anxieties accelerate is helping Citi reach the goal by the end of this year, ahead of the 2023 target.
“The new role of Chief Sustainability Officer is a reflection of the importance of this work in shaping our business activities, internal operations and stakeholder engagement.”
The New York bank’s green efforts date back two decades to when it started tracking emissions and setting targets. In 2002, Citi began reporting on their operational footprint.
It’s seen demand rise for its sustainable finance products. Working with JP Morgan Chase, BNP Paribas, ING and others, Citi has issued sustainability-linked loans, a product that provides borrowers with incentives to meet sustainability performance goals with opportunities for margin-rate discounts. SLL borrowers can use the proceeds for virtually anything, unlike green bonds, which are tied to a specific purpose. In 2017, ING issued the first SLL to Dutch technology multinational Philips for $1.2 billion, tying its performance to its “sustainalytics” rating.
Citi issued its first green bond in January, a $1.1 billion offering after carving a niche as a leading green bond lead manager. It’s participated in green deals worth $24.2 billion since the green bond market’s inception ten years ago, according to Environmental Finance’s bond database. Issuance of green bonds has grown from less than $1 billion in 2009 to $177 billion in 2018. Green bonds topped $100 billion in the first half of this year, and Citi estimates that green bonds may become a trillion-dollar opportunity for climate-related investments by 2020.
Citi’s new appointment comes as the orthodoxy that companies place maximizing profits above all comes under greater scrutiny. In August, the Business Roundtable announced a stakeholder-centered view of corporate governance that moves away from shareholder primacy. Corbat is a member of the Roundtable.
Investors have pressed for further clarity from companies, requesting a one-page “statement of purpose,” for instance, that details principal stakeholders, spending, and timeframes for evaluating strategy. Further, writes Martin Lipton in the Financial Times last month, surveys show an expectation among investors that companies assert a “socially and economically valuable purpose,” speak out on issues and communicate their efforts to mitigate growing inequality and environmental degradation.
Recognizing this, last week’s forum was a reminder of how efforts to address global warming have proven a powerful catalyst in galvanizing the discussion over the position of companies wider social impact.