Q&A: Bringing sustainability principles into banking
The Asset talks with Citigroup’s chief sustainability officer about how clients are approaching sustainable finance
From green bonds to sustainability-linked loans, an increasing number of companies are examining or planning to execute ESG (environmental, social and governance) focused capital market deals. With the aim of positively impacting the environment and society, banks across the world are starting to focus their attention on supporting the ESG goals of their clients. In an interview with The Asset (TA),Val Smith, chief sustainability officer at Citigroup, shared her views on how the bank is supporting clients in its sustainability drive.
TA: What has Citi been doing in 2019 to drive sustainability globally?
Smith: In 2019 we have been focusing on reaching our US$100 billion finance goal and have also been looking at our climate risk assessment strategy. More specifically over the summer of 2019 we announced the co-development and partnership with our clients on the Poseidon Principles. It is designed to help the shipping sector decarbonize and involves engagement between the banks and regulators on the shipping industry.
The other set of principles that were released were the ones on sustainable banking that were just launched in September this year. They were developed by a group of banks in the United Nations Environment Finance Initiative.
TA: How are your clients approaching the topic of sustainable finance in their operations?
Smith: If we are not bringing conversations related to sustainability and ESG to our clients, it’s because those clients have gotten to us first. All of our clients are interested in talking about ESG in terms of what their banks are doing and how these financial institutions can help them through different financial opportunities.
Those sustainability conversations with clients often start with listening as we want to make sure that we are communicating with our clients on our environmental and social risk standards. We want to make sure that they understand the array of sustainable finance products that are currently available.
It starts with understanding what our clients want to achieve. You really need to speak with the clients and engage with them and understand what their sustainability goals are and how it’s integrated into their respective businesses. Sustainable finance usually starts from a position of exploration and understanding about what is important to them.
TA: What are some of the reservations from clients when incorporating sustainable finance into their business operations?
Smith: Clients will say there are certain costs involved in issuing a green or sustainability bond. There is certainly additional work to be done up front. They want to understand what the benefits are and do their own cost-benefit analysis. There is an opportunity for issuers of a green or sustainable bond to diversify their investor base and to really get your sustainability story out there to investors. I think that’s a pretty powerful factor.
The internal learning exercise that happens as a result of issuing a green bond is also very useful. Pulling all those internal teams together to execute a particular issuance is very rewarding.
TA: What has been the catalyst for sustainable banking and what future goals do you expect to achieve at Citi in the near future?
Smith: I think in the years since the Paris Agreement and the development of the UNSDGs (United Nations Sustainability Development Goals), we have really seen this incredible amount of new momentum and having been in Citi for 15 years in the sustainability department, I can tell you the environment feels very different from what it was before. We are increasingly seeing clients viewing sustainability as a pressing part of their business.
Going forward we will be working on our next-generation client risk assessment work in an effort to make our clients and become more sustainable. A year from now I expect to see the sustainability agenda really infiltrating and really being driven in every aspect of our company.
Social Media Links (This section can be seen in office only):
Twitter : https://www.theasset.com/article-single.php?id=39001&social=twitter
Linkedin : https://www.theasset.com/article-single.php?id=39001&social=linkedin
Facebook : https://www.theasset.com/article-single.php?id=39001&social=facebook