2017 Global Citizenship Report Executive Summary

Monitoring the Changing Risk Landscape Our ESRM team uses a number of methods to proac- tively scan for both new, emerging risks as well as risks with increased prominence and prevalence. We continually evaluate these risks for both specific clients and projects, and more broadly in high-risk industries and stakeholder areas of concern. Our risk monitoring feeds into our ESRM Watchlist process, rolled out in 2017. Through this process we flag individual companies based on their track records, sensitive or controversial assets, third-party analyst scores and/or negative news. We review potential transactions for these clients and identify opportuni- ties for engagement to understand what steps these clients are taking to address challenges and imple- ment improved practices where needed. CASE STUDY Upholding International Standards with Financing Decisions While implementing our ESRM Policy, we sometimes come to the conclusion that we need to decline a transaction that doesn’t meet accepted standards. For instance, during 2017, Citi bankers in early discussions with a company about a large hydro project in Africa contacted the ESRM team for an early ESRM screening of the project. Our research identified that the project would negatively impact a World Heritage Site, a Ramsar wetland and wildlife habitat and migration corridors. Given these impacts, we determined we were not comfortable with the magnitude of the potential risks and it was unlikely the project would be able to meet international standards. As a result, we declined to continue discussions on the project. What’s Ahead In 2018 the outcomes from the UNEP FI pilot on TCFD will begin to help inform our approach to managing climate risk, as well as our related disclosures. We will put our research on labor rights into action by enhancing our Palm Oil Sector Standard questionnaire with specific questions related to systemic labor risks on oil palm plantations, and we will seek opportuni- ties for our clients’ to implement new labor welfare monitoring technologies to better assess labor practices deeper in the contractor supply chain. We will work to better understand how we can most effectively address deforestation risks in our clients’ activities and champion progress in conserving high conservation value forests. Citi will also actively participate in the Equator Principles update process, helping to design the next iteration of this global standard for banks evaluating environmental and social risks. Citi 2017 Global Citizenship Report Executive Summary 17