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Citigroup's "New Initiatives"
Environment Policy Change
In an effort to silence critics of its financing of highly destructive megaprojects around the world, including the
Citigroup (Citibank) implemented "New Initiatives" on January 21, 2004. The New Initiatives are prospective only. They do not provide for withdrawal from environmentally unsound projects already underway. Nor do they include any measures to ameliorate the injuries caused by Citigroup financing, even though Citigroup is the world's most profitable bank. (Record profits of almost $18 billion, up 33%, were reported on 23 January 2004.)
Citigroup's New Initiatives are reproduced below, in the hope that the loopholes will be identified and closed and that more comprehensive policies will be adopted by other lenders. My initial comments follow at the end.
Citigroup's New Initiatives
Consistent with its responsibilities under and the requirements of the Equator Principles and led by its project finance business, Citigroup will carefully evaluate requests for project finance loans where the borrower's proposed use of proceeds would directly fund activities that Citigroup determines could adversely impact a critical natural habitat1.
Citigroup will ensure that the appropriate Citigroup bankers throughout the world are aware of and alert to this new Equator-based approach. Citigroup will periodically engage with various stakeholders and evaluate its experience with these policies in a year with stakeholders and report annually in our Corporate Citizenship Report.
Citigroup will not finance any project or provide general corporate loans to any project (where the use of proceeds is known) if the project or use of proceeds is located within critical natural habitats, unless the sponsor or borrower, as appropriate, has demonstrated to Citigroup's satisfaction:
The project sponsors have considered economic and technically feasible alternatives to avoid such areas and have addressed these issues in the publicly available EA.
The project will not significantly degrade2 or convert3 the critical natural habitat;
Project management has adequate capacity and willingness to ensure biodiversity protection and respect for the rights of indigenous communities whose livelihoods or cultural integrity could be adversely impacted;
Indigenous peoples4 impacted by the project, whether directly or by induced impact, have the opportunity and if needed, culturally appropriate representation, and have access to the information to engage in informed participation;
The governmental authorities at the local, regional or national level have provided mechanisms for the affected communities to be represented or consulted, and international and local laws have been upheld5; and
An Environmental Impact Assessment has been prepared that takes into account such consultations and is publicly available.
In accordance with the Equator Principles, Citigroup will follow International Finance Corporation Safeguards in effect at the time Citigroup becomes engaged in a project, including the following:
Citigroup will not finance commercial logging operations or the purchase of logging equipment for use in primary6 tropical moist forest7.
Citigroup will finance only preservation and light, nonextractive use of forest resources in forest areas of high ecological value.
Citigroup will finance plantations only on nonforested areas (including previously planted areas) or on heavily degraded forestland.
Citigroup will not finance projects that contravene any relevant international environmental agreement which has been enacted into the law of, or otherwise has the force of law in, the country in which the project is located.
Citigroup recognizes that illegal logging is increasingly a threat to forests worldwide. We appreciate that forests provide humanity with precious natural resources. As expressed in numerous international forums including the G8, the UN Forum on Forests, and the World Summit on Sustainable Development, illegal logging is a significant contributor to the degradation and loss of critical forest ecosystems in many regions around the world. Citigroup recognizes the menace to valued ecosystems and forest community livelihoods posed by illegal logging. We recognize that violations of logging laws around the world can have irreparable damage in fragile forest ecological networks where such illegal activity occurs.
Illegal logging causes a number of adverse environmental, economic, and political or social impacts such as depriving national and local governments of related tax revenue, as well as forest owners and local communities of significant revenues and benefits, and acts as a disincentive to sustainable logging. In some countries the corruption associated with illegal logging undermines the rule of law. As evidenced by recently enacted United Nations Security Council sanctions, illegal logging has been associated with civil wars and, is considered a conflict commodity in various battle zones, funding and sustaining violent upheavals.
In this context Citigroup understands illegal logging to take place where timber is harvested in violation of local and national laws intended to stop illegal logging8. Illegal logging includes: a) using corrupt means to gain access to forests, b) extraction without permission or from a legally unauthorized area, c) the cutting of protected species or the extraction of timber in excess of legal limits or in violation of legally approved forest management plans.
Consistent with Citigroup's Code of Conduct (pdf), all employees of the company and its subsidiaries are expected to act in accordance with the highest standards of personal and professional integrity in all aspects of their employment, and to comply with all applicable laws, regulations and company policies. As such, we will not make loans to companies whom we know to be in violation of local or national laws regarding illegal logging. Citigroup is committed to contributing to the fight against illegal logging and preventing the flow of funds to illegal logging actors. This battle presents new challenges. Successful participation in this fight requires global cooperation by governments, the private sector and civil society.
Citigroup will pursue four policies and programs regarding illegal logging:
Request Citigroup customers seeking loans related to the extraction or processing of forest resources to make appropriate representations regarding compliance with applicable law. This means that a customer will represent to Citigroup that it will comply with all applicable laws including national and local laws regarding illegal logging. Representation in this context is a binding and documented assurance which, if false, could constitute an event of default. Documentation includes all of the documents required to secure a loan including government authorization as necessary.
Take the following steps to combat illegal logging as appropriate 1) engage government and industry forums on trade and governance, 2) participate in on-going forums on illegal logging, and 3) support civil society organizations to advocate for forest law enforcement and policy reform.
Ensure that our businesses and risk management throughout the world are aware of and alert to the issue of illegal logging9.
Deepen our collaboration with knowledgeable stakeholders to strengthen our collective efforts to help prevent illegal logging. Better information on the extent of the problem is a prerequisite to developing practical and effective countermeasures.
Investing in Ecologically Sustainable Development
Citigroup has developed a program to invest in sustainable forestry and renewable energy. Citigroup has identified experienced resources to screen and evaluate potential investments in the sustainable forestry and renewable energy industries to ensure that investment opportunities in these two sectors get exposure and an evaluation consistent with all other investments on an ongoing basis.
We see immediate opportunities in three areas:
Investments in independently certified sustainable logging – Citigroup is evaluating specific investment funds dedicated to FSC certified forest products located in emerging markets. Portfolio companies in these funds are committed to low impact logging, maintaining ecosystem function in the forest lands, and marketing branded sustainable product. Their financial success will protect more forests and employ more local people in sustainable commerce. Citigroup will have the capacity to evaluate these investments on an ongoing basis.
Investments in renewable energy – Citigroup will identify experts to evaluate investment funds dedicated to renewable energy technologies such as wind, solar, hydrogen, biomass etc. Investments in these companies reduce the environmental footprint of the energy sector.
Residential Clean Energy Financing - Citigroup will explore existing programs to offer consumer financing for solar panels, residential wind turbines and fuel cells, and other forms of clean energy or energy efficiency fit for residential consumers. Citigroup will offer and market a Fannie Mae energy efficient mortgage product by the first quarter of 2004.
The Intergovernmental Panel on Climate Change (IPCC) - a United Nations panel of 2,000 of the world's top climate scientists-agree that human activities are changing the climate. As a global company, Citigroup is taking a proactive stance on this important issue. Citigroup will play a role in the financial sector to reduce greenhouse gas emissions from its own operations, and assist customers to develop financial solutions that help reduce emissions in the value chain and invest in renewable energy.
Citigroup published its first ever report on energy used in 2002 in the over 10,000 buildings it leases or owns globally. This process has engaged 150 employees, and is building Citigroup's understanding and capacity in greenhouse gas emissions reporting and energy use reduction.
Beyond its own direct emissions, Citigroup will report the greenhouse gas emissions from the power sector projects in its project finance portfolio beginning the latter half of 2003 and going forward. This report will occur annually in the Corporate Citizenship report. This is the first time that a private bank will offer such data, which will be produced with methodologies peer reviewed with experts and NGOs. As reporting methodologies become standardized for other sectors, Citigroup may expand the report.
Finally, the above-mentioned program to identify investments in renewable energy and energy efficiency will help reduce emissions in Citigroup's chain of activities, by adding customers and business partners with an explicit focus on greenhouse gases and energy efficiency.
1. Citigroup's New Initiatives are an enormous step in the right direction. However, they clearly need to be strengthened before becoming the industry standard. Under the New Initiatives, Citigroup can finance new projects that destroy old growth forests and other pristine habitats with a few exceptions, and existing anti-environment loans continue without modification.
2. The above document is not a contract and is not legally binding on Citigroup. There are no provisions for enforcement or for remedies in the event of violations. The New Initiatives should be amended to set forth procedures for resolving claims of violations, such as a provision for arbitration of disputes.
3. Tropical dry forests have suffered greater losses than tropical moist forests and are the home to some of the world's most endangered birds. However, the New Initiatives do not prevent Citigroup from continuing to lend money for destruction of the remaining primary tropical dry forests.
4. Similarly, the New Initiatives do not prevent Citigroup from continuing to finance the logging of old-growth temperate rainforests.
5. The World Bank, financed involuntarily by the taxpayers of the US and Europe, is a principal enemy of the environment. It is responsible for the wholesale deforestation of many parts of the world, including Rondônia, Brazil and numerous, formerly forested areas of Indonesia to which Javan transmigrants were relocated with World Bank financing. Little has changed since the 13-year tenure of the notorious Vietnam war criminal, Robert McNamara. Indeed, the World Bank is currently planning to increased old growth logging in the Democratic Republic of Congo (formerly Belgian Congo) by 60 times, which will wipe out the great central African forests. In recent years, the World Bank has silenced formerly critical Big Green environmental groups by paying some of their expenses, yet it continues to resist all efforts at reform. (See, e.g., "World Bank chiefs reject oil and coal proposals", FT, 3 February 2004; Brazilian NGO Forum removes itself from the World Bank Consultation, Amazonia.org.br, 29 September 2004): "After [World Bank President] Wolfensohn had guaranteed last Tuesday to the NGO's a detailed response about the environmental evaluation of a loan [to the Mato Grosso, Brazil governor's corporation for] soybean expansion in Amazonia, the IFC Board of Directors approved the loan on Thursday without an explanation or at least the demand of an environmental impact evaluation as required in the institution's procedures.") Now, following in the McNamara tradition of making the World Bank the War Criminal Retirement Home, Dumbo Bush's puppet masters have arranged the appointment of their colleague, Paul Wolfowitz, the devious architect of the illegal invasions of Afghanistan and Iraq, to head the World Bank. The New Initiatives agreement should rely upon assessments by independent experts and not the hopelessly corrupt World Bank. (Footnote 1).
6. FSC "sustainable logging" sustains profits, not ecosystems. It is old-growth logging with a new name designed to neutralize environmental objections without regard for forest ecology. FSC certification of wood does not take into account the disastrous impacts of old-growth logging on birds, especially birds of the forest interior and birds that depend on vines and middle storey vegetation that is destroyed in "low impact" logging.
"Seeing the Wood from the Trees" by Nicole Freris & Klemens Laschefski, The Ecologist, Vol. 31, No. 6 (July/August 2001). An exposé of the fiasco at Precious Woods Amazon, a FSC-certified "sustainable" logging operation in Brazil.
FSC Certifies Logging of Tiger Habitat in Indonesia. Forests.org, 30 July 2001. The FSC certified logging of old-growth forest in Sumatra without even requiring an environmental impact assessment over the objections of WALHI, Indonesia's largest environmental organization.
Forest Stewardship Council Relaxes Certification Rules. Forests.org. 22 February 2000. "Under the new rules . . ., the minimum percentage of wood from certified forests required for chip and fiber products to bear the FSC label has been cut from 70 percent to 30 percent. This will be raised to 50 percent in 2005."
Taking Protest to Bank Chief's Home Street, 3 Activists Face Charges. By Alison Leigh Cowan, New York Times, 13 March 2005. The Greenwich, CT police, protectors of the rich and famous who are best known for not pursuing the well-connected murderer of Martha Moxley, arrested activists who posted Wanted posters identifying J.P. Chase Morgan CEO William B. Harrison, Jr. as "Billy The Kid" for financing global environmental destruction, as well as the person who gave them a ride from the station.