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May 16, 2007
Banking on the Future: The Two Biggest US Banks To Dedicate Billions to Halting Climate Change
    by Anne Moore Odell

Citigroup and Bank of America have pledged billions of dollars to help fight climate change while a new report questions Chinese banks' environmental policies.


Last week Citigroup announced an allocation of $50 billion in investments and financing to mitigate climate change over the next decade. This follows Bank of America’s announcement in March that they are pledging $20 billion to support environmentally sustainable businesses and combat climate change. With the US’s two largest banks pledging to change the way they do business to support sustainability and the environment, it seems there is a new awareness of the need to do something now to alleviate and adapt to global climate change.

However, a new report released from Friends of the Earth (FoE) and Banktrack shows that Chinese banks still have miles to go before they can be considered green. The role of Chinese banks is especially troubling when considering the huge environmentally-unfriendly projects these banks are supporting and that many international banks, including Citigroup (Citi) and Bank of American (BoA), own stocks in Chinese banks.

“With a presence in more than 100 countries, Citi holds a unique position within the global community. This informs our commitment to bring forward the best solutions for our clients, while also benefiting the people and the communities where we operate,” said Charles Prince, Chairman and CEO of Citi.

“One area where we believe we have this opportunity is on environmental and climate issues, which pose a significant challenge to the world, to the global economy, and to clients and require forceful action,” Prince added.

Citigroup has already invested $10 billion of the $50 billion in helping fight climate change. It plans to reduce its own greenhouse emissions 10% by 2011 across its more than 14,5000 global facilities. BoA likewise pledges to reduce greenhouse gas emissions 9% by 2009. BoA has a program that is putting more gas efficient cars on the road for its employees with a $3,000 hybrid vehicle reimbursement program.

"We have the opportunity to do more than address our own internal business practices," said Anne Finucane, chief marketing officer and chair of BoA’s environmental council. "As one of the world's leading financial institutions, we can and will work directly with individual and business customers to address the pressing issue of global climate change."

Both BoA and Citigroup are constructing greener buildings. Citi and BoA are working for certification of their new buildings from Leadership in Energy and Environmental Design (LEED) for both their office buildings and retail branches. BoA is currently putting up offices in New York City and Charlotte, NC that are more environmentally efficient.

Citi’s Market and Banking Group plans to put over $31 billion in clean energy and technologies, building on its current commitments of $7.5 billion. Citi recently financed the $2.15 billion ownership of a wind portfolio by Energias de Portugal (EDP) that brings new wind developments to market. Citi also offers Citi Alternative Investments and Citi Property Investors, which offer environmentally friendly investments and investment in sustainable building projects. In April, Citi created Sustainable Development Investments (SDI) and plans to commit $2 billion of private equity over the next ten years to clean technologies and renewable energy sources.

BoA is committing $18 billion to help commercial clients use and produce environmentally sustainable products and technologies. Part of this initiative is a carbon-emission trading program that will allow clients to trade carbon emissions credits to achieve carbon emission neutrality. Pending regulatory approval from the Office of Currency Control (OCC), BoA plans to participate in the evolving emissions markets globally via the Chicago Climate Exchange and the European Union Greenhouse Gas Emissions Trading Scheme (EU ETS).

Individual consumers at the banks can chose climate friendly credit cards, mortgages and other banking products. Citi will plant a tree for each customer that chooses a paperless statement while BoA consumers can choose an eco-friendly credit card that for every dollar spent on the card, BOA will contribute to an environmentally organization.

While many environmental activists applaud the banks’ pledges, some also question how committed to clean energy the banks truly are. The Rainforest Action Network (RAN) points out that Citigroup is the largest financier of the energy industry that produces many greenhouses gases.

Banktrack and Friends of the Earth released a report this month that describes the need for international banks to take responsibility in pressing for better reporting standards for Chinese banks. Banktrack is an international non-governmental organization with headquarters in the Netherlands that monitors the world’s financial sector.

The report entitled “Time to go Green: Environmental Responsibility in the Chinese Banking Sector” reports that only two of the ten most important Chinese banks have publicly disclosed environmental policies. China Development Bank (CDB) and the Export-Import Bank of China (Chexim), the two banks with reporting policies, still do not comply with international best practices. The other banks in the report include Bank of China, Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, China Export & Credit Insurance Corporation (Sinosure), Agricultural Development Bank of China, Bank of Communications, and China CITIC Group.

Chinese banks, the report states, bankroll many industrial developments in China with worldwide environmental effects. Chinese banks are also financing more projects around the world. The report stresses that shareholders in Chinese banks, including many international banks, need to work with the Chinese banks to institute higher environmental standards.

Chinese banks’ lack of transparency makes it difficult to know how well Chinese banks’ environmental policies are being implemented.

“Transparency and disclosure is a key issue for all banks. Without information regarding banks’ environmental standards and how they are being implemented, consumers, policy makers and civil society groups will not be able to identify environmental leaders, nor hold laggards accountable,” Michelle Chan-Fisher, program manager, Green Investments project, Friends of the Earth told Socialfunds.com.

“Banks particularly have a responsibility to communities that are affected by their financing activities; communities have a right to know which banks are behind a particular project, and what kinds of environmental standards are supposed to be followed,” she added.

The report did have some good news. Beijing has committed to improving environmental quality in China. China Development Bank, which is a government policy bank, last month announced plans that it would increase environmental lending in the next few years. In its announcement, CDB pointed out that it provided an emergency loan for the government to cleanup the Songhua River after the toxic chemical disaster in 2005. But the report also notes that CDB also financed China National Petroleum, whose subsidiary, Jilin Petrochemical, was the very company responsible for the spill.

Citi owns 20% of China Guangdong Development Bank (CGDB), and is taking managerial control over CGDB. Chan-Fishel points out that this “offers Citi a unique ability to introduce high environmental and social standards that will benefit the people and environment of China, and also advance sustainability on a global level." BoA owns about 9% of the China Construction Bank.

Pledging money for the future is, of course, unpredictable. Time will tell if these banks follow through on their promises, and take not only the credit for environmentally positive projects they sponsor, but also take responsibility for the environmental damage they underwrite.

 

 
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