Search this website. You can use fund codes to locate specific funds

US multinational Citigroup is one of the world’s systemically important financial institutions.

Engagement Objective - Environmental:
Environmental - Clean energy financing
Social - Anti-corruption policies and enforcement, Dakota Access Pipeline
Governance - Pay for performance


In the aftermath of the financial crisis, we began engaging intensively with the systemically important financial institutions. This was not only because of destruction in value at those companies as a result of the crisis. It is also because their financial health and good behaviour towards their clients and customers is vital to minimise the risks of a similar profound shock to the global economy and to wider economic prosperity. As one of the world’s largest banks, Citigroup (Citi) falls into this group.

Like its peers, Citi has to demonstrate a societal purpose, exemplary, ethical conduct and good quality and effective corporate governance. Disappointingly, the company did not only face significant conduct issues arising from the financial crisis but was also beset by problems in Mexico associated with external fraud.

In addition, we believe that the financial services sector has a vital role to play in helping the transition to the low-carbon economy. This can be achieved by minimising the industry’s exposure to the most polluting companies and by identifying opportunities to help its customers and clients in their own efforts to reduce emissions and find business opportunities in the transition. Doing this also contributes to rebuilding and deepening the trust of its stakeholders by demonstrating that the industry can be a powerful force in creating prosperity and other societal benefits.

Our engagement

In the early stages of our engagement we encouraged and were pleased with the company’s efforts to reshape its board following the financial crisis and engaged in discussions with management during that transformation, including with its independent chair.

We welcomed the board’s appointment of an independent director to chair the company who views meeting shareholders and their representatives, including ourselves, as a vital part of his responsibilities. Positively, the board now appears to be playing the role that we expect, with regular refreshment to keep its deliberations and perspectives fresh.

With the reshaped board in place, the focus of our discussions with the company changed towards conduct and culture. We had objectives concerning pay being better related to conduct and for the company to take the necessary action and learn the lessons of corruption allegations relating to its Mexican operation. We sought an understanding of how the board expects the company and its employees to behave and how it oversees these expectations. The company has given us many detailed accounts of the various methods it uses to achieve the goals it has set in relation to behaviour and its considerable efforts on this essential work. These include changes over time to its pay practices, with risk management and conduct baked into the determination of remuneration throughout the organisation.

Changes at the company

Its response to the issues arising from the external fraud in Mexico – and the time spent discussing it with us – showed that Citigroup now seems to tackle issues of conduct and culture differently from the conduct that led to the financial crisis, enabling us to satisfy ourselves that the bank has addressed these issues and takes them seriously. We are also pleased that pay is explicitly linked to conduct and not just financial results.

The bank was on the way to achieving its clean energy finance target several years early to meet another of our objectives during 2017. However, it now plans to change the way it calculates its target, making its achievement more onerous, while keeping the headline target intact. We agree with the bank that its new target is a better way of assessing its progress. We expect to see this target met and more onerous targets set as the global economy moves to decarbonise.

The positive changes at the bank were predicated, we believe, by the strategic objective of the board to put behaviour at the centre of its thinking as it reconstituted itself in the wake of the financial crisis. We are pleased with the way that the bank has responded to our engagement and that of other stakeholders to change its conduct.

The bank’s reaction to the controversial Dakota Access Pipeline during 2016 and 2017 reflected its changed behaviour. It has publicly acknowledged that its due diligence on the project was not as good as it should have been. The bank subsequently met stakeholders, including representatives of the Standing Rock Sioux Tribe and First Peoples Worldwide, on a number of occasions to develop better policies and practices over its future project financing activities, working with the Equator Principles Steering Committee to improve due diligence, including in developed markets. The way it acknowledged that it should have done better and then worked to improve is a marked change from the tone at the top of the bank before the financial crisis.


Related Articles

Public declaration of voting recommendations 2022
EOS Stewardship Report 2021
LyondellBasell case study

EOS Client Service and Business Development

Amy D’Eugenio,
Head of Client Service and Business Development, EOS