Americas ESG Financing House: Citigroup

IFR Awards 2023
4 min read
Michelle Chan

Transition amid volatility

Citigroup strengthened its position in 2023, defying macroeconomic headwinds and an anti-ESG backlash in the US. For its role in introducing sustainability deals to new geographies and hard-to-abate sectors, Citigroup is IFR’s Americas ESG Financing House of the Year.

2023 was a challenging year for sustainable financing as high interest rates dented broader borrowing demand and a political backlash against ESG initiatives further subdued labelled deals in the US.

Nevertheless, Citigroup maintained a strong ESG deal flow in the region with labelled bonds for US issuers, including Mars and MidAmerican Energy, innovative bond issues in Latin America and debut labelled offerings and frameworks in a variety of sectors.

Citigroup in 2023 dethroned JP Morgan and Bank of America as the top underwriters of ESG bonds in the Americas, moving up from third place. Deal value jumped 37% to US$10.8bn, according to LSEG data, representing a 9.2% market share, up from 6.9% in 2022.

“Transition is a theme that we’ve focused on,” said Philip Brown, global head of sustainable debt capital markets at Citigroup. “We have a lot of expertise in engaging with various sectors on transition financing.”

Citigroup boasts a 12-strong global sustainable capital markets team, which spreads across New York, London, Hong Kong and Tokyo. “We collaborate very closely,” Brown said.

In 2023, the bank brought a diverse group of issuers to the sustainable bond market, which is historically dominated by utilities. In February, it led two debut ESG deals in the chemical sector to help the hard-to-abate industry decarbonise and minimise environmental impact.

Citigroup was sole green structuring agent and an active bookrunner for Eastman Chemical’s US$500m inaugural green bond and co-green structuring agent and global coordinator for Air Products and Chemicals, which raised €700m and US$600m in an inaugural dual-currency green bond offering.

The shipping industry is another hard-to-abate sector that Citigroup focuses on. The bank was an active bookrunner in September for Danish container shipping giant AP Moller-Maersk’s first US dollar green bond, which raised US$750m for clean transport and green buildings.

Even as ESG-labelled bond issuance declined in the US, activity was picking up in Latin America where Citigroup is a leading underwriter.

Latin rhythm

The bank led some of the most sophisticated and innovative ESG deals in Latin America last year, especially in the sustainability-linked bond market that slowed in other parts of the world in response to the greenwashing debate and questions over the effectiveness of targets.

In October, Chile completed two sovereign SLBs in local currency. The first was a UF24m (US$927m) inaugural SLB that was inflation-linked and was quickly followed by a Ps1.75trn (US$1.9bn) SLB.

The coupons of the two SLBs are linked to the country’s sustainability performance targets, including reducing greenhouse gas emissions and increasing female board representation. Failure to achieve these targets will result in higher interest payments.

Citigroup also embraced complex deal structuring to preempt greenwashing concerns around SLBs. In a US$500m SLB issue by Brazilian sanitation company Aegea, an amount equal to the net proceeds will be allocated for green and social projects in a dual SLB and sustainable deal that combines KPI-linked and use-of-proceeds formats.

The US bank also brought some rare issuers to the ESG bond market in 2023. It led a US$400m high-yield SLB in January by Liberty Costa Rica, a subsidiary of US-based telecom Liberty Latin America, marking the first ESG-labelled deal for a private corporate issuer in Costa Rica.

With a strong record of executing ESG-labelled transactions, Citigroup continues to be committed to its US$1trn goal for sustainable finance by 2030. Brown said the bank is looking to grow its sustainable deposit programme in 2024 and expand that to a wider pool of customers.

Despite the raging anti-ESG campaign led by some Republican politicians, Brown remains optimistic about the future of sustainable financing.

“US investors have got some of the most sophisticated strategies towards ESG and they are outcome-specific,” he said. “We still do a huge amount of renewable energy financing in the US.”

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