phase to identify potential heightened environmental or social risks related to the client. Our policy prohibits financing any project for which our due diligence identifies the use of forced labor, harmful or exploitative child labor, or when the relevant labor forces have been subjected to human trafficking. Under the ESRM Policy, Citi screens for human rights risks in project-related transactions and clients subject to ESRM sector-specific requirements. In addition, the ESRM Policy includes Areas of High Caution, which identify flags for heightened human rights risk factors to escalate to the specialized ESRM team for review regardless of finan - cial product or sector. If, d uring o ur i nitial s creening f or a t rans - action, w e fi nd a r isk o f a dverse i mpacts, we c onduct m ore i n-depth d ue d iligence, and w e e valuate t he c lient’s c ommitment and c apacity t o a void, m itigate a nd/or manage t hose i mpacts i n a ccordance with i nternational i ndustry b est p ractices and h uman r ights n orms a nd t he c lient’s willingness t o c ontinuously i mprove. W e escalate t he m ost c hallenging c ases w ith the h ighest p otential f or a dverse i mpacts to s enior b usiness a nd r isk m anagers f or collective d iscussion o n t he r isks a nd t he client’s c ommitment a nd c apacity. I n s ome cases, s enior m anagement w ill c onclude that t he l ikelihood f or a dverse i mpacts is t oo g reat — p osing a n i mminent t hreat to p eople o r c ommunities — a nd w e w ill decline i nvolvement i n t he t ransaction. I n severe c ircumstances, w here w e c annot otherwise e ffectively i nfluence di fferent human r ights o utcomes d espite o ur b est efforts o f su stained e ngagement, w e w ill end t he c lient r elationship. T his i s a m ove we t ake v ery s eriously, s ince w e r ecognize that i t c an h ave a n umber o f r amifica - tions, i ncluding r emoving a ny l everage we m ight o therwise h ave h ad t o i mprove practices o ver t ime t hrough c onstructive engagement. After the financial close of a transaction or a client onboarding that was subject to a time-bound environmental and social action plan, we monitor the company’s implementation of those actions. For project-related transactions this often involves the retention of an independent environmental and social risk consultant who periodically reports to lenders after on-the-ground audits. In addition, for non-project related transactions where human rights risks have been flagged for ongoing monitoring, our ESRM team uses annual client credit reviews as touchpoints to assess progress on human-rights- related issues. Protection of Indigenous Rights in Latin America Citi understands that Indigenous Peoples’ distinct identities, languages, beliefs, cultural values, lands and use of natural resources may be under threat, representing a higher degree of vulnerability. Activities that may impact Indigenous People have long been acknowledged as an Area of High Caution under our ESRM Policy, and require enhanced due diligence. In 2021, we put additional emphasis on the evaluation of our Latin American oil and gas clients and mining clients during new trans - actions and annual credit reviews, to continue identifying clients with operations that may overlap Indigenous territories. All clients were assessed on their community engagement and biodiversity management practices. When overlap with Indigenous territories was identified, Citi engaged clients to assess how they incorporated free, prior and informed consent into their engagement practices with Indigenous Peoples. Contents ESGatCiti SustainableFinance SustainableProgress Equitable&ResilientCommunities Talent&DEI RiskManagement&ResponsibleBusiness Appendices CITI 2021 ESG REPORT 131