Citi targets Big Oil in biggest step among major banks on climate change

Jan. 19, 2022  By Rachel Koning Beals

Financial-services giant sets rare ‘absolute reduction’ target for fossil-fuel pollution, but will halt oil-and-gas lending only as a last resort

Citi aims for an “absolute reduction” in emissions from companies across its energy loan portfolio of 29% by 2030 from 2020 — tougher language in the effort to curb global warming than most big banks.

Citigroup Inc. will be tougher on clients in the oil-and-gas industry, changing the way the bank asks Big Oil to measure how much pollution their efforts spew into the air as a requirement for receiving financing while the world tries to curb global warming.

Citi C, -0.73% said Wednesday in a report that it aims for an “absolute reduction” in emissions from companies across its energy loan portfolio of 29% by 2030 from 2020. Citi did stress that dropping oil and gas clients if they are deemed to fall short of such targets would only be a last resort.

Other banks have focused on pushing clients to reduce their “emissions intensity,” a measure of emissions relative to output, instead of just emissions in general, which “absolute reduction” targets. Some climate activists argue that emissions intensity is a softer metric that does not go far enough if global warming is going to be limited to 1.5 degrees Celsius.

Citi did keep the “emissions intensity” language in its call for the power sector, targeting a 63% reduction in emissions intensity for borrowers across that sector. Some analysts have said a mix of energy sources — ranging from natural gas NG00, -3.25% to nuclear to wind and solar and the more experimental and not-yet-scalable green hydrogen — will be needed in the transition years as EVs and other electric sources put added demand on the nation’s grid.

Citi repeated in the report its aim to achieve net-zero carbon emissions associated with its financing by 2050, a marker similar to most pledges in the financial-services space.

The financial sector has been accused of “greenwashing” by some environmental groups and lawmakers, who suggest that broad pledges — including cutting emissions at their own banking centers — carry little water when a funding pipeline continues to keep fossil-fuel firms pumping oil and gas. Burning fossil fuels accounted for 74% of U.S. greenhouse gas emissions in 2019, the most recent year for complete data, according to the Energy Information Administration.

Major banks, including JPMorgan Chase JPM, -0.33%, Bank of America BAC, -0.11% and Citi, have invested $3.8 trillion in fossil fuels since the Paris Agreement targeting global warming was signed in 2015, at least through early last year, according to tracking by a handful of climate organizations, including the Rainforest Action Network.

But banking leaders have said regulators must go slow and avoid one-size-fits-all treatment when it comes to proposed climate-change and energy-sector financing rules. Sudden disruption to the energy sector poses bigger risks to the economy, they argue.