Editor’s Note: Michael Corbat is CEO of Citi. The opinions expressed in this commentary are his own.
In the early days of the global pandemic, we got a glimpse of what progress in the fight against climate change could look like. With lockdowns keeping cars off the road and causing office buildings to shutter and industry to slow down, air pollution temporarily decreased over cities from Los Angeles to Mumbai.
But here’s the rub: It’s unlikely these reductions in air pollution will continue as global economies reopen. What we need is systemic change — dictated by government policy, supported by science and powered by the resources and innovation of the private sector.
Businesses, especially those in the financial sector like us, can have an enormous positive impact on the climate movement. By transforming energy systems, industrial processes, land use, buildings, transport and other infrastructure so they are more sustainable, we could simultaneously create thousands of new jobs and help propel a post-pandemic recovery.
The financial sector, with its deep resources and ethos of managing risk while capitalizing on opportunity, must be at the center of this movement. Here’s how we can make a difference:
Set the standard
For starters, financial institutions can create a uniform set of standards for companies to identify and disclose the potential impacts of their businesses on the environment and the potential impacts of climate change on their businesses. This transparency, in turn, will help insurers, credit rating agencies, lenders and other investors better evaluate and price those risks and opportunities. It will also give companies an incentive to disclose, take action on and address their environmental impacts.
I’ve always believed that you can’t manage what you can’t measure, and that’s especially true with a warming planet. It’s imperative that banks like ours continue to develop tools to understand the consequences of climate change across our lending portfolios. We must be willing to have frank conversations with our clients about what they need to do to reduce their emissions — and if we aren’t aligned on the need to make this transition, then we must have the courage to walk away.
Work with the fossil fuel industry
As one of the world’s biggest backers of fossil fuels, Citi has heard calls to divest entirely from the industry. But that would mean knocking the legs out from under the global economy since we remain so dependent on oil and gas to drive our cars, heat our homes and fuel our ships and airplanes.
So while we recognize that the fossil fuel industry must drastically reduce its carbon footprint over the coming decade, we believe in working with them, not against them. For example, some energy producers are already taking steps to address their emissions, such as reducing methane leaks from their production processes, and the largest among them have the R&D capacity we need to develop new technologies and unlock new paths to a low-carbon energy future.
Invest in innovation
As part of our efforts to drive the transition to a sustainable economy, we recently fulfilled a 10-year commitment to finance and facilitate $100 billion in environmental activities, including the world’s largest offshore wind farm off the coast of England, trains for Panama City’s new metro system, water conservation technology in Barbados and energy-efficient affordable housing in the South Bronx section of New York City.
The fact that we met this 10-year goal four years ahead of schedule not only demonstrates the demand among local communities for climate solutions, but also the lucrative business opportunities for institutions like ours. We are now embarking on a new five-year effort to support a further $250 billion in environmental activities.
None of this will be easy, particularly now. At a time when economies have been brought to a near halt, many sectors are worried about surviving the next quarter, let alone the next quarter-century. Companies are surely questioning the affordability of an environmental agenda amid a liquidity crisis that has stirred up numerous existential challenges.
But in many ways, this is a false dilemma. Among the biggest lessons we must learn from the pandemic are the inextricable links between our economic health and our physical health and the immediacy of the threats to our planet. As we have seen, the companies that have had a strong focus on sustainability and resiliency — particularly with respect to responsibly managing supply chains and safeguarding the well-being of employees — have been in a much stronger position to address the havoc that is occurring across the globe from the coronavirus pandemic.
This is not a time to pull back from making our companies more sustainable and resilient. Instead, it’s time to double down.