Progressing the ESG Agenda to Become Greener Cleaner and More Competitive

For sustainability-linked financing to have a genuine impact, suppliers need to be incentivized to improve their ESG performance; however, this requires reliable, transparent and independently auditable metrics. As a result, Citi has partnered with EcoVadis, a leading sustainability ratings provider. We work with clients to set up supply chain programmes that offer preferential financing rates to suppliers based on their ability to demonstrate improvements in sustainability metrics using EcoVadis scorecards. Building in reputable ESG metrics into decision-making processes also helps to avoid the potential for ‘greenwashing’. Disclosure of ESG metrics is becoming a growing obligation to meet bank, investor and customer demands and build confidence in ESG performance. This poses a particular challenge for multinational businesses that work with multiple banks and diverse customer groups, and therefore have multiple disclosure requirements. Even so, the Carbon Disclosure Project recently announced that over 13,000 companies, worth over 64% of global market capitalization, disclosed data through CDP on climate change, water security and deforestation in 2021, an increase of 37% since 2020 3 . 3 https://cdpturkey.sabanciuniv.edu/en/content/cdp-reports- record-number-disclosures We use customized questionnaires to produce scorecards that provide a starting point for active improvement and collaboration between companies and their commercial partners. Some of the themes we cover include the environmental impact of their activities, products and services on labour and human rights, how companies manage risks related to employee health and safety, working conditions and human rights violations such as forced labour. We also cover anti- corruption policies, information security and sustainable procurement. Melina Goncalves Centre of Excellence Advisor & Senior Sustainability Analyst, EcoVadis Partnering for sustainability in Asia Pacific At Citi, we have committed $1 trillion in sustainable financing by 2030 4 . We are doing this through sustainable supply chain finance solutions, green loans and export credit agency (ECA)-backed financing linked to sustainability goals. However, we recognized that the trade-off between development and finance in Asia Pacific differs from other parts of the world, so we take a nuanced approach to sustainable financing. In Europe, for example, where carbon emissions are reducing, it is easier to quantify the benefit of projects that further cut emissions. In a country such as Indonesia, where energy usage continues to rise, it is far more difficult to define an acceptable level of carbon intensity. Despite the challenges, momentum is building for businesses, financial institutions, investors, regulators and governments to work together to create clean, green and prosperous communities across Asia Pacific, whilst remaining competitive in global trade. 4 https://blog.citigroup.com/2021/04/citi-commits-1-trillion-to-sustainable- finance-by-2030/