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12 September 2007
Global Financial Firm Bets on Green Power
Citi to invest $50 billion in greenhouse gas reduction
Washington -- How does a financial services organization -- even one that is the world's largest -- address the challenge of climate change and greenhouse gases in a major way when it does not operate a single industrial or transportation company?
In the case of Citi (formerly Citigroup), with some 200 million customer accounts and business activities in roughly 100 countries, the answer is a complex, ambitious program to direct $50 billion over the next decade into “green" investments, alternative energy and new technologies.
The program, said Citi Chief Executive Officer Charles Prince, "is not a wish list, but a realistic, achievable plan that serves a critical global need -- and responds to an emerging investment opportunity."
Initiatives such as Citi's are critical components in the partnership of governments, the private sector, volunteer organizations and local communities to reduce greenhouse gases. This challenge will be the focus of a conference called the Major Economies Meeting on Energy Security and Climate Change, to be hosted by President Bush in Washington September 27-28. (See fact sheet.)
Citi seeks to reduce greenhouse gases that contribute to global warming through a variety of "green" strategies that harness market-based forces and investments for clients that can run a profit while helping solve perhaps the chief environmental issue of this generation.
"Citi understands how profoundly climate change will transform the economy, and they are pioneering opportunities for the capital markets to meet the climate challenge," says Eileen Claussen, president of the nonprofit, independent Pew Center on Global Climate Change.
REDUCING CITI'S FOOTPRINT
Citi's 10-year program is as multifaceted as the company itself. As much as $10 billion will be devoted to reducing Citi's own environmental "footprint," primarily through measures to cut greenhouse gas emissions from its extensive real estate holdings some 10 percent from 2005 levels by the year 2011. This is an undertaking encompassing 14,500 offices and facilities around the world.
In Frankfurt, Germany, for example, Citi is constructing a data center that will be one of the most energy- and resource-efficient of its kind. "The new center will be our largest outside the United States," says Citi official Sue Harnett, "but you won't know that from our electrical bill."
By contrast to conventional buildings of similar size, the Frankfurt center, scheduled to open in March 2008, will use 25 percent less electricity -- equivalent to the power for 3,000 homes for a year -- emit 11,000 fewer tons of carbon dioxide, and save 40 million liters of water annually.
ENERGY INVESTMENTS
Over the next decade, Citi plans to invest more than $30 billion in clean and alternative energy through subsidiaries such as Sustainable Development Investments and Citi Alternative Investments. These programs range from "renewables" like wind, solar and geothermal energy to new technologies, such as highly efficient, combustion engines and hydrogen fuel cells. (See related article.)
One such company is Suzion, a wind turbine manufacturer in India. Another is Loreto Bay, a 5,000-home development in Baja, Mexico, that is one of the largest sustainable resort communities in North America.
CitiMortgage has partnered with Japan's Sharp Electronics, the world's largest maker of solar cells, to offer loans and lines of credit for homeowners to install solar electric systems. Citi also recently introduced an energy-efficient mortgage and a promotion for hybrid auto financing. (See related article.)
CARBON FINANCE
Any successful effort to lower discharges of carbon dioxide and other greenhouse gases will have to rely, in part, on allowing market forces to provide incentives to achieve national and international climate goals.
One such mechanism, which Citi actively is pursuing, is that of global carbon markets, also known as emissions trading. The basic concept is straightforward: establish an overall cap on the discharge of a specific gas, then allow companies and other emitters to buy and sell emission units among themselves while maintaining, or even gradually lowering, the overall ceiling.
Such emission markets already have worked successfully in the United States to limit acid-rain pollutants like nitrogen oxides and sulfur dioxide. Emissions trading now is being employed to limit the potent greenhouse gas methane as well. (See related article.)
Citi, which already has an emissions trading office in London, recently concluded an innovative deal between the British airline EasyJet and a hydropower producer in Ecuador that allows EasyJet passengers to offset emissions from their travel.
Global markets for greenhouse gases are just beginning to emerge, notably in Europe, according to Citi, which predicts that a similar market will appear shortly in the state of California (the world's sixth-largest economy).
As a result, Citi reports that the global carbon market is growing exponentially -- from $337 million in 2004 to $12 billion in 2005, and nearly $30 billion at the start of 2007.
In other words, Citi believes that the growing carbon market could offer both profits for investors and major greenhouse gas reductions for the world.
For more information, see the publication USA Energy Needs, Clean Development and Climate Change Partnerships in Action and Climate Change and Clean Energy.
(USINFO is produced by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
