Nearly half of the energy companies Citi Bank provides lending to lack strategies for reducing greenhouse gas emissions, as disclosed in a climate report released by the fourth-largest U.S. bank on Thursday.
Banks are diligently scrutinizing their loan portfolios to assess the risks posed to businesses by climate change and to evaluate their readiness to transition to a low-carbon economy.
This comes as regulatory bodies worldwide intensify their requirements for transparency and disclosure regarding climate-related matters.
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Citi categorized the energy companies in its loan portfolio according to their emissions reduction plans, which are grouped into three categories, referred to as scopes, ranging from “low” to “strong.”
In 42% of instances, it identified an “absence of a substantive transition plan” and a failure to disclose Scope 3 emissions, encompassing emissions from companies’ supply chains and customers. Deloitte consultants note that these emissions typically constitute around 70% of their carbon footprints.
The analysis, which started last year, is based on data from 2021. Chief Sustainability Officer Valerie Smith said she expected the data collection and analysis timing to improve.
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“We are still in building mode. We understand the importance of moving forward on climate. We also understand the energy transition is a monumental effort, it is not happening overnight,” Smith said.