debt issuances in 2020, which itself had set records. 1 The sustainable mergers and acquisitions deal activity reached $197 billion in 2021, which was a 60% increase from 2020 activity. 2 Growth also continues to be seen in the markets for sustainability-linked financing, one of the fastest-growing innovations in sustainable finance. Sustainability-linked instruments a re g eneral c orporate p urpose transactions that use key performance indicators (KPIs) and sustainability targets to measure a company’s progress, which result in a reduced financing rate if the target is met or a penalty if the company fails to meet the target. With momentum gained in recent years, the growth of sustainability-linked financing extended to the global leveraged finance markets in 2021; 2 sustainability-linked transaction volumes increased significantly across leveraged loan and high-yield bond issuances, highlighting the popularity of tying sustainability performance to cost of financing. This innovation is also expected to grow in the derivative markets, with sustainability-linked derivatives. Acknowledging this momentum in the market, we count sustainability-linked instruments toward Citi’s sustainable finance goal when they incorporate sustainability key performance indicators and targets that are aligned with at least one of the goal criteria. The growth of sustainable capital markets has also been driven by corporations, sovereigns and supranational institutions focused on achieving their sustainability commitments, contributing to the SDGs and aligning with the goals of the Paris Agreement. Many of our business units across the bank contribute to our $1 trillion commit - ment. There are global industry specialist teams that focus on different sectors and industries, such as the recently formed Natural Resources & Clean Energy Transition team, which engages with our clients to support their low-carbon transition efforts, as well as the Citi Social Finance team, which partners with busi - ness units across Citi to help drive inno - vative efforts on social finance activities in emerging markets. In many instances, the deals have integrated and interrelated environmental and social elements and impacts. For additional information on new teams we created or restructured over the last few years to engage with clients on their sustainability and transition journeys, see the Sustainable Pr ogress s ection. The following are just some examples of innovative environmental and social finance transactions from 2021 that will be counted toward the overall $1 trillion commitment. INCENTIVIZING SUPPLY CHAINS: M c CORMICK & COMPANY Sustainable Agriculture In 2021, Citi par tnered with McCormick & Company, a global leader in flavor, and the International Finance Corporation (IFC) to provide McCormick’s suppliers with financial incentives linked to improvements in measures of social and environmental sustainability. McCormick’s supply chain spans over 3,000 agricultural products sourced from more than 85 countries. Under the initiative, suppliers can qualify for discounted rates on short-term working capital financing when they achieve sustainability standards accepted by McCormick. These standards include performance on labor conditions, health and safety practices, crop management, environmental impact, farmer resilience and women’s empowerment. The partnership included an advisory component in Vietnam, where IFC is helping McCormick build a more sustainable, traceable, certified and quality-compliant pepper supply chain through capacity development and the empowerment of women farmers. 2. https://www.refinitiv.com/perspectives/market-insights/sustainable-finance-continues-surge-in-2021/ . Contents ESGatCiti SustainableFinance SustainableProgress Equitable&ResilientCommunities Talent&DEI RiskManagement&ResponsibleBusiness Appendices CITI 2021 ESG REPORT 23