Dive Brief:

• Citi said 71% of its energy-sector clients either lack a substantive low-carbon transition plan that accounts for scope 1, 2 and 3 emissions or have a high-level plan in place but have “unclear ability to execute” on it, the bank disclosed in its latest climate report last week.
• About 42% of Citi’s energy clients lacked a substantive transition plan for greenhouse gas emissions across their supply chain, while 29% of energy clients don’t have a clear strategy in place to execute on their high-level transition plans, the report found.
• The bank agreed to disclose the progress of its energy and power clients’ transition plans as a result of a shareholder resolution proposed by As You Sow in November, which has since been withdrawn. Citi Chief Sustainability Officer Valerie Smith told ESG Dive that while As You Sow’s proposal varied from the final disclosures, the bank “had a sense for what the disclosure could be that would make sense in terms of [its] strategy.”

Dive Insight:

Citi’s energy clients include companies predominantly related to oil and gas production, but also include bioenergy, carbon capture, utilization and sequestration, direct air capture hydrogen and renewable energy, according to its 2021 Task Force for Climate-related Financial Disclosures report. Its power-sector clients are power generation companies, utilities and others in the electricity sector like battery, carbon capture, utilization and sequestration, hydrogen fuel cells, nuclear and solar companies. 

Smith said Citi had recently completed a two-year process building a net-zero review template for the energy and power sectors when it received As You Sow’s proposal, and had been thinking about how to show investors it was helping clients transition.

“The core of our net zero commitment was really around supporting our clients in the transition,” Smith told ESG Dive on Monday. “We think [the transition plan assessment] will be a very useful way for us to demonstrate to our investors and other readers [of the report] that we are in fact helping our clients to transition.”

Citi’s clients in the energy sector are doing better in their transition plans for scope 1 and scope 2 emissions — which Smith said the bank assessed separately for the sector because those are what the clients have control over — according to the report. The findings also concluded that 37% of clients were taking steps to decarbonize their operations and 37% had comprehensive and ambitious plans with “demonstrated ability to execute.”

When assessing energy clients’ scope 3 preparations, the report found that they were less aligned: 20% were assessed as having all the core elements in place and taking steps to decarbonize, while 8% had comprehensive plans and a demonstrated ability to execute. 

While a lot of companies are making progress on their scope 1 and 2 emissions plans, “a lot of clients are sort of somewhere in the middle” when looking at the full scope of strategies undertaken to curb emissions, Smith said.

“When you think about sort of how demand affects supply, you would just expect to see that demand side transition happening first,” Smith said. “What we see on the energy side is that there are a lot of different strategies that our clients are engaging with in order to think about their near term decarbonization and longer term transition.”

As You Sow commended Citi for its “transparency and responsiveness to shareholders” in providing this disclosure, but the results of the energy sector’s full-scoped emissions transition plan assessment “indicates that Citi must begin addressing this critical shortfall to meet its own climate commitments,” the organization’s chief counsel, Danielle Fugere, said in a release.

This is also the first year that Citi, a founding member of the Net Zero Banking Alliance, disclosed its facilitated emission for the energy and power sectors as part of its TCFD report. The bank reported it facilitated 2.9 million metric tons of carbon dioxide equivalent of scope 1 and 2 emissions in the energy sector and 3.5 million metric tons of carbon dioxide equivalent in the power sector. Those are the equivalents of burning nearly 16,000 and over 19,000 railroad cars of coal, respectively, according to the Environmental Protection Agency’s GHG equivalencies calculator.

The firm only calculated its facilitated scope 3 emissions for the energy sector, where it facilitated 15.5 million metric mtCO2e — the equivalent to burning over 85,000 railroad cars of coal — according to the EPA’s calculator.

However, Smith noted that all of the report’s metrics — including financed emissions and additional data aligned with the TCFD’s recommendations — are intended to be viewed as a suite of data, rather than individually. Additionally, she said the industry is still in the early days of the climate data market, contributing to a time lag in the data analysis, as the report is based on its clients’ fiscal 2022 financial reports and 2021 sustainability reports.

“I believe that the disclosure we had this year helps to increase the transparency, helps to begin to orient the investor in terms of where we're headed, and our work with our clients, and also hopefully shares with the market our learnings,” Smith said.

The disclosures come shortly after Citi agreed to a shareholder proposal put forth by the New York City Comptroller’s office, asking the company to disclose its financing ratio of low-carbon energy supply to fossil fuel supply. JPMorgan Chase had similarly agreed to the green financing ratio proposal the comptroller’s office proposed last month.