Wednesday, 15 August 2018

Upstanding citizen

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As well as being one of the world’s biggest banks, Citi has an active CSR programme, through which it has given millions of dollars in countries around the world in a range of projects. Financial education and microfinance development are the cornerstones of its efforts. Solomon Teague reports.

The Citi Foundation is the philanthropic arm of Citi and the face of its CSR programme. “The bank’s CSR efforts are not limited to the foundation, or to any individual department within the bank,” stressed Swati Patel, head of citizenship EMEA at the bank. “The principles behind the CSR programme have permeated the bank’s activity at every level, determining the business it does – or does not do,” she said.

For example, the the Equator Principles, originally drafted by Citi along with ABN AMRO, Barclays and WestLB, are a set of environmental and social policy guidelines financial institutions can voluntarily sign up to that stipulates which businesses they can lend to. Having signed up to the initiative it becomes impossible for a bank to offer project financing worth more than US$10m to a project deemed unethical, based on the principles, regardless of how profitable the venture might be.

The 10 principles seek to eliminate or limit the negative impacts on project-affected ecosystems and communities, and provide appropriate compensation where avoidance or mitigation are not possible. They are a good example of financial self-regulation working well: having been first adopted by 10 banks in June 2003 (ABN AMRO, Barclays, Citigroup, Credit Lyonnais, Credit Suisse First Boston, HVB Group, Rabobank, RBS, WestLB and Westpac), there are now more than 60 banks signed up. This seriously inhibits the ability of questionable projects to get financing.

It is also important to ensure that sustainability informs decisions made throughout the organisation, said Patel, with employees turning their computers off at night and finding other ways to behave sustainably.

The Citi Foundation concentrates its efforts in five areas: education; financial education; microfinance; small and growing businesses; and the environment. Ideas are generated locally, ensuring business plans are relevant in the context of their own jurisdictions. Grants are awarded if they fall into one of the categories and are deemed worthy of it. Countries are weighted, according to factors like population and revenue, with allocations to those countries determined by that weighting. So, for example, the UK receives more grants than Ghana.

Being a bank, financial education is a key element of Citi’s responsibility. To date Citi has spent approximately US$121m on financial education worldwide as part of a US$200m commitment over 10 years, starting in 2004. In the first year of the programme it spent US$23m in 40 countries. In 2006 this had risen to US$32m covering a peak of 72 countries. Although the money committed continued to grow into 2007, reaching US$36m, the number of countries Citi was active in had fallen back to 65.

This money is spent on courses aimed at children, teenagers and adults. There are more basic courses available for younger students, looking at how to earn money and spend it more wisely, through to investing and understanding the role of the media in fashion for teenagers and managing credit for adults.

Through its efforts in microfinance, Citi last year channelled US$95m globally to small but growing businesses. Grants are typically awarded in relatively small amounts, although they can still have a significant impact on cottage-industry level businesses. Yet there is no commensurate reduction in the level of due diligence conducted to reflect the smaller sums of money involved: thorough checks are conducted on businesses, regardless if the grant is US$5,000 or US$50,000, said Patel.

Its microfinance efforts sprawl across 35 countries, encompassing relationships with 70 microfinance organisations. Among the projects it has financed are fishing net repairs for a Moroccan woman – the only woman in Morocco with a fishing licence at the time the grant was awarded – and a retraining programme for Ghanaian fishermen who lost access to their waters when the map of the area was redrawn, enabling them to make a living as chilli peppers farmers.

Citi has also been active in specifically environmental projects: it earmarked US$50bn for climate change action last year, to be spent over 10 years, and has so far spent US$94m of that money.

Citi, also working as part of a small group of banks, drafted the Carbon Principles. These govern the activities of US utilities and their banking relationships “to evaluate and address carbon risks in the financing of electric power projects”, according to the group.

Citi’s commitment to the Citi Foundation and to CSR generally remains solid despite the difficult economic circumstances. “Everything is always subject to review, but financial education and microfinance are more important now than ever, as is the business rationale for prudent spending,” said Patel.

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