ESG at Citi Sustainable Finance Climate Risk & Net Zero Sustainable Operations Building Equitable & Resilient Communities Talent & DEI Responsible Business Appendices Our Net Zero Commitment Our Approach to Managing Climate Risk Reducing Climate Risk in Our Financing Transition obstacles faced by developing CLIMATE RISK IN OUR MARITIME SHIPPING PORTFOLIO countries: Less robust socioeconomic insti- Reducing tutional capacity constrains implementation Citi is a founding signatory of the Poseidon Principles, which establish a framework for assessing and of low-carbon transition pathways across disclosing the climate alignment of ship finance portfolios. As a part of our commitment, we have emerging markets. In addition, developing Climate disclosed our climate alignment score since 2019. These disclosures are published alongside those of countries often have more limited capacity other signatories in an annual report published on the Poseidon Principles website. to transition, due to unequal and challenged Risk in Our Our most recent alignment score, based on 2021 data, illustrates slightly less alignment, up to access to climate finance. They also frequently +12.2% from +11.7% (a higher score represents greater misalignment with the Principles). Our score lack the investment capital necessary to fund Financing. was impacted by our clients’ operational priorities as well as the residual impacts of the COVID-19 adaptation and mitigation solutions, including pandemic, in particular the effect of port congestion and demand in the container sector, as well as the renewable energy and technology-driven clean tentative resumption of the cruise industry in 2021. The cruise segment represented +6.3% of our total energy alternatives. alignment score of +12.2%. Our cargo alignment score was also impacted in 2021 due to the significant tonnage demand increase in dry cargo, as well as the pre-existing issues in the container sector. Most Increased regulatory requirements and lack of Evolving Our of the misalignment relates to three individual client situations in which COVID-19-driven operational harmonization: For example, the Security and issues during 2021 are unlikely to have been repeated in 2022. We therefore expect improvement in Exchange Commission (SEC) has proposed a Approach next year’s report for our 2022 total alignment score. rule — the Enhancement and Standardization of Climate-Related Disclosures for Investors — Integrating climate risk into our policies and that would require registrants (including Citi) to sector standards provides the foundation Challenges and progress and providing clear year-over-year include certain climate-related information in for consistently identifying and managing comparisons of data. We are engaged with SEC filings. We have provided comments on the climate-related risks across our company. Since Emerging Issues leading data vendors and industry groups in an proposed rule, showing support for the overall 2015, our ESRM Policy has included approaches effort to rapidly improve overall data quality, goal and identifying some areas of concern. to financing clients involved in coal mining or coal We continue to be aware of evolving challenges and there are several efforts underway within (Read our full comments.) In addition, Europe is power. In addition, our most recent 2022 updates and emerging issues, some of which include: Citi to improve the quality of the data we rely rapidly expanding requirements, including the to address the climate-related impacts from beef on. In addition, we have processes and working Corporate Sustainability Reporting Directive. and soy production in sensitive ecoregions of The availability and quality of climate-related groups across the firm focused on data quality Between these two frameworks, there are Latin America are discussed in the Environmental data: As discussed elsewhere in this section, our and governance. We will continue to advance differences in the topics to be disclosed, the and Social Risk Management section. reliance on data that is based on estimated or our data improvement work in parallel with level of detail required and the materiality unverified figures makes precision difficult and our decarbonization efforts, with the intention thresholds to apply. Such issues increase the creates challenges for many of our climate- of incorporating additional insights as they complexity of our disclosure processes. related activities, including scenario analysis, become available. setting emissions reduction targets, tracking Citi 2022 ESG Report Page 32