April 2002 - VOLUME 23 - NUMBER 4
C i t i g r o u p : B a n k r u p t i n g D e m o c r a c y
The Cost of Living Richly
By Ilyse Hogue
Citigroups Global Finance
and Threats to the Environment
Flying low over a pristine rainforest region in the remote Urubamba
region of the Peruvian Amazon, a helicopter brings supplies to a construction
site. As the native birds scramble out of the way, the helicopter sets
down on a patch of land cleared of forest as part of the Camisea project,
one of Latin Americas largest gas developments.
Across the globe in Papua New Guinea, a pipeline from the Gobe oil fields
cuts through the forest land and small farms. Roads built to service the
project are opening frontier forests to timber companies, increasing the
threat of soil erosion that will load the rivers with silt and kill the
countrys offshore coral reefs.
Thailands Ratchaburi power plant lies just across the border from
Burmas ongoing human rights nightmare. The plant processes gas from
the Yadana and Yetagun gas pipelines that are one of the main revenue
earners for Burmas military dictatorship. The pipeline, much of
it built by forced labor, cuts through the largest, richest block of moist
forest in Indochina.
In the western hemisphere, the battle continues to rage over some of
the last remaining old growth forest in the United States: Headwaters
Grove in Northern California. While activists fight Pacific Lumber to
save spotted owl habitat, the cutting continues. With it, so does the
pollution of nearby streams and rivers, choking the spawning ground of
the endangered Coho salmon.
At first glance, all of these projects have one thing in common: they
damage whats left of the worlds forests and, by contributing
to fossil fuel burning and deforestation, they contribute to the worsening
of global warming. But dig a little deeper and they also share a startling
denominator. All were made possible through financing by the worlds
largest financial institution, Citigroup.
Cut to billboards around many major U.S. cities.
These are slogans from Citigroups new $100 million advertising
campaign. The tag line is Citi Live Richly. It is the
juxtaposition between these two presentations of one corporation that
is at the center of controversy over the role that the Citigroup plays
in financing the fossil fuel, mining and logging industries.
A growing environmentalist campaign is insisting that Citis record
of financing the fossil fuel, mining and logging industries around the
world is fundamentally incompatible with the companys massive public
relations initiative to present itself as the avatar of personal financial
security for consumers. Citi-financed projects, say environmentalists,
are promoting environmental insecurity not only damaging local
ecosystems, but undermining the livelihood of communities around the world
and threatening the well-being of people across the globe through climate
Over the last decade, the flows of private finance to support the Third
World have rapidly accelerated. Private foreign finance now plays a much
bigger role than public monies including loans from the World Bank
and other development banks, and foreign assistance in determining
what big projects get built in the Third World, whether pipelines, factories,
mines or energy plants.
But the private funders, of which Citi is the most prominent, exercise
far less environmental and social screening of projects they might fund
than does even the much-criticized World Bank. The unfolding campaign
against Citi aims to change that.
There is near-total scientific consensus as to the reality of global
warming, and an emerging scientific consensus that the phenomenon
which threatens to submerge vast stretches of coastal lands and lead to
surges of tropical disease, among many other ills is now underway.
The five hottest years ever recorded occurred in the 1990s. In 1998, the
hottest year ever recorded, severe weather patterns caused more financial
loss than they had during all of the 1980s, killing an estimated 32,000
people, displacing 300 million, and causing $89 billion in damages. In
January 2001, the Intergovernmental Panel on Climate Change (IPCC)
the global network of all the worlds leading climatologists
cited new and stronger evidence that most of the observed warming
of the last 50 years is attributable to human activities.
The worlds forests, which act as giant reservoirs of carbon, are
an integral part of the planets climate system, both a massive carbon
source and one of the planets best natural lines of defense against
climate destabilization. Forest destruction releases vast amounts of carbon
into the air, while at the same time eliminating the planets ability
to absorb carbon. Forest protection is a key strategy for confronting
global warming, says Mike Brune, campaigns director at Rainforest
Action Network. Forests are key to maintaining local ecosystems and supporting
indigenous communities. Old growth forests are home to over 50 percent
of the planets plant and animal species and three-quarters of the
worlds traditional indigenous peoples, Brune notes.
Yet according to the World Resources Institute, 78 percent of the worlds
original old growth forests have been logged or degraded, and remaining
intact forests are highly threatened by logging and development. In
this day and age, destroying old growth forests is like hunting whales
to extinction or slaughtering elephants for ivory, says Brune.
The era of old growth logging seems to be coming to a close. Polls and
consumption patterns show that the U.S. public is demonstrating opposition
to any more use of old growth forests for wood and paper products. In
a national poll conducted by the Los Angeles Times last year, nine out
of ten people said it is important that wilderness be preserved. Even
in the private sector, hundreds of corporations many small businesses,
but also large companies including IBM, Hewlett Packard and Home Depot
have changed their business practices to stop using products from
Now it is no longer tenable, say environmentalists, for the global financiers
to fund project development while ignoring or giving short shrift to urgent
The connection between finance and global warming is not lost on the
insurance industry. Forced to pay out claims, large insurers like Swiss
Re and Munich Re have begun to evaluate their exposure to the industry
which accelerates global warming: the fossil fuel sector. In the year
2000, the Overseas Private Investment Corporation (OPIC) published a report
on its investments in fossil fuels. Environmentalists say this acknowledgement
by major financial institutions of their own exposure and contribution
to the onset of global warming has the potential to signal a fundamental
redirection of capital flows in the energy sector away from destructive
projects and towards renewable alternatives.
Some institutions have moved to take action, including several prominent
European banks. In late 2001, the top Dutch Bank, ABN/AMRO, instituted
a policy that prohibits the financing of extractive industries and projects
that degrade old growth forests. ABN/AMROs statement asserted that
ABN Amro will no longer finance projects or operations which will
result in resource extraction from, or the clearing of, either primary
or High Conservation Value forests. The bank will consider exceptions
only where extraction is part of a carefully planned, responsible
national forest management program or where the company is FSC [Forest
Stewardship Council] certified for operations in that forest. The
policy applies to all sectors that might affect forests, including logging,
pulp and paper, mining and oil & gas development.
Herman Mulder, head of ABN/AMROs Risk Management division, believes
that the new credit practice will be widely adopted quickly. Companies
that manage their environment poorly will suffer financially, he
told the Dutch publication Volkskrant. Clients and shareholders
walk away, employees will seek another boss.
The industry leader, Citigroup, has yet to adopt this point of view,
however. According to Bloomberg Financial Services Analytic in 2001, Citi
is the number one funder of oil drilling and new pipelines, with 28 percent
of the global market share. Citi is also the top funder of new coal mining,
holding 51 percent of the global market share, according to Bloomberg.
Citi ranks as third largest funder of forest products and paper production.
Citi dominates the financing of projects in sectors that promote global
warming and destroy the ecosystems that could offset adverse impacts of
A survey of Citis fossil fuel portfolio makes the companys
strategy abundantly clear: in an age when global warming and forest destruction
are widely recognized as global threats, Citigroup chooses to be the top
financier in the exploration for new oil and gas and the industries that
get those fuels to market. Citi claims to be a global leader, but it is
leading in the wrong direction, say environmentalists.
The Bottom Line
But this rhetorical majesty is not matched by meaningful policies, according
to environmentalists. Notably, Citi has refused calls to commit to comprehensive
environmental and social criteria in its investment decisions.
It is difficult to make sense of Citis stated commitment
to the environment in light of the sampling of projects they fund just
in the Amazon Basin, says Atossa Soltani, director of Amazon Watch,
a non-profit organization that works with indigenous and environmental
organizations in the Amazon Basin to defend the environment and advance
indigenous peoples rights. The OCP pipeline in Ecuador, the
CVRD mines in Brazil, the Camisea Gas Field in Peru; these are all projects
with enormous environmental and social consequence. They are also projects
that are financed by Citi. The OCP pipeline in Ecuador has recently
generated massive protests in Ecuador.
Citi insists it is a leader among financial institutions in incorporating
environmental considerations into its lending and other operations, and
that its participation in projects leads to better environmental outcomes.
We have a long history of focusing on environmental concerns and
developing policies and procedures that address the kinds of issues that
are being raised with these kinds of projects, says Citigroup spokesperson
Christina Pretto. In fact, Salomon Brothers, one of our predecessor
companies, was the first financial institution to implement an environmental
affairs program, and the program now covers our whole organization. We
think that, given our history and the real infrastructure thats
in place to deal with these issues substantively, to work with our sponsors
and get them to address the concerns being raised by people makes our
involvement ultimately a positive thing.
Another concern raised by environmentalists is Citigroups failure
to capitalize on environmentally beneficial lending and investment opportunities.
Solar panels and small wind turbines have the potential to be the
cheapest form of energy for millions of Americans across the country,
explains Phil Radford, executive director of PowerShift, a group working
to promote renewable energy technologies. Citibank has neglected
to take advantage of the $4 billion U.S. market in solar loans. This bank
is missing the opportunity to help stop global warming by phasing out
fossil fuel investments and promoting clean energy now. The irony is that
if Citi financed solar for peoples homes, solar energy could be
made immediately affordable for millions of Americans today.
Responds, Citibanks Pretto: We are the number one underwriter
of state and local government debt in the United States. That is a multibillion
dollar market. That financing goes to schools, public transportation,
water and sewer projects all of which are mandated by the Clean
Air Act and Clean Water Act. So we have a public finance business thats
focused on underwriting projects that make a real difference in peoples
lives. To ignore that would be a real distortion of the role we play in
Citigroups heavy reliance on its consumer base and the public perception
of its brand make it highly vulnerable to a campaign that uses public
leverage to catalyze change. Tens of thousands of individuals have heeded
a call from the Rainforest Action Network to cut up their Citibank credit
cards and sign pledges not to do business with Citi until it satisfactorily
addresses environmental issues. Many students around the United States
have pressured their universities to sever ties with Citigroup, and students
have been at the forefront of the pressure for Citi to transform its lending
and trading practices.
As long as Citi is bankrolling rainforest destruction, global warming
and the displacement of indigenous peoples, says Vanessa Pierce,
a student leader at Iowas Grinnell College. Students will
join together to say Not with my money to the worlds
most destructive bank. We will continue to ask the tough questions of
Citi, like Who is living richly, and at whos expense?