sectors. These sector-specific risk review processes encourage dialogue between Citi a nd o ur c lients a bout t he m aterial e nvi - ronmental and social risks associated with their operations, enabling us to develop a better understanding of prevailing indus - try practices and our clients’ performance and to guide our clients toward more sustainable practices. Monitoring the Changing Risk Landscape The ESRM team uses a number of methods to proactively scan the changing risk landscape for new, emerging risks, as well as risks with increased prominence and prevalence. Through internal research, engagement with our regional ESRM Champions, collaboration with others in our industry, and the use of third-party environmental and social data, we monitor relevant developments in high-risk industries and stakeholder concerns to flag emerging issues. Proactive monitoring enables us to identify issues and the interrelated impacts of various sectors, so we can be responsive to evolving risks, raise awareness within Citi about emerging issues and identify clients that may be impacted for further engagement. We are beginning to incorporate new tools to scan for emerging environmental and social risks. The team has reviewed a range of technologies for use in our due diligence approach, such as environmental DNA gathering to conduct biodiversity baseline studies and benchmark improvements in biodiversity values over time. This technique enables the analysis of DNA in water or soil samples to identify the fauna living in a given project area without the need to visually verify their presence. Another way we monitor risk is by conduct - ing sector-specific reviews to identify and mitigate emerging risks in our existing portfolio. These evaluations are based on information published or provided by the client as well as information from special - ized ESG rating agencies and topic-specific databases. This process enables us to better understand how our clients manage environmental and social issues and provides valuable insight into the level of related risk across our portfolio. In 2021, we conducted reviews of our mining, oil and gas, and power portfolios as well as a portfolio review of our clients in Malaysia related to human rights . PROTECTING BIODIVERSITY AND ADDRESSING RESETTLEMENT CONCERNS IN PANAMA CITY In 2021, Citi, in coordination with other financial institutions, closed a $2 billion transaction to finance Metro Line 3, an expansion of Panama City’s metro system. Citi worked with Consorcio HPH, a consortium of Korean companies responsible for the construction of Metro Line 3. Because this is a project-related corporate loan for more than $50 million, due diligence processes required an independent review before the close of the transaction. Consorcio HPH and the lenders engaged environmental and social consultant, ERM, to evaluate the project’s environmental and social impacts and benchmark management plans against international standards. This due diligence revealed two primary risks related to the project: potential biodiversity impacts and physical/economic displacement of individuals and businesses along the path of the new metro line. To address biodiversity concerns and align the project with IFC Performance Standard 6 for biodiversity , ERM performed a Critical Habitat Assessment to study potential impacts on migratory and/or congregatory species within the project’s area of influence. ERM identified an Important Bird Area, including habitat for species such as the broad-winged hawk, Swainson’s hawk and turkey vulture. The assessment revealed that a small area of Critical Habitat (0.54 hectare) would be directly impacted by the project. In order to ensure a net gain of critical habitat and no net-loss of natural habitat, Consorcio HPH will implement reforestation and biodiversity monitoring programs to measure results. After a review of impacts related to resettlement and livelihood displacement, it was determined that the project’s need for resettlement would be minimal. Nonetheless, Consorcio HPH is working with Metro de Panama S.A. (MPSA) to ensure that proper protocols are followed when engaging with residents about the need for resettlement, attaining willing seller consent, providing adequate compensation and developing livelihood restoration plans for those who may be impacted. MPSA is also working with a social consultant to enhance its local resettlement process to align with international best practice, including the IFC Performance Standard 5 for resettlement . As an additional precaution, the project’s construction schedule is tied to review by ERM and the lenders to ensure that resettlement risks are fully assessed and benchmarked before construction begins in areas where resettlement or displacement may occur. Contents ESGatCiti SustainableFinance SustainableProgress Equitable&ResilientCommunities Talent&DEI RiskManagement&ResponsibleBusiness Appendices CITI 2021 ESG REPORT 117