A Brief History:

• June 4, 2003: The Equator Principles were officially launched in Washington, DC. The initial adopters included Citi and nine other global financial institutions. By 2009, the number of Equator Principles Financial Institutions (EPFIs) had grown to over sixty-five.
• October 2003: The first US financial institution to do so, Citi develops a comprehensive ESRM Policy which applies a similar review and risk management framework as the Equator Principles to other financial products – (current full list found in table below).
• June 2004: Citi hires an ESRM Director to implement the ESRM Policy; train bankers, risk managers, legal and credit officers on the Policy; and serve as an internal advisor to senior management and staff.
• July 2006: The Equator Principles are updated to reflect the new Performance Standards of the International Finance Corporation (IFC – the private sector arm of the World Bank), which replaced the previous IFC Safeguard Policies. Citi was a lead author for the Equator Principles redrafting and revisions process. Citi re-adopts the updated Equator Principles along with 40 other financial institutions at an event in London.
• September 2007: Citi's ESRM Unit grows to three full time staff, plus a number of "ESRM Champions" located in regions, who provide real-time advice to bankers and support the ESRM Unit, and "ESRM Approvers", senior level credit officers responsible for review and approval of Category A transactions.
• February 2008: Citi, along with JP Morgan and Morgan Stanley, announce the release of the Carbon Principles, a framework to evaluate carbon risk of financing coal-fired power projects in the US in the face of federal policy uncertainty. Bank of America, Credit Suisse and Wells Fargo sign on to the Carbon Principles as well in following months. The Principles were developed in close collaboration with clients and industry advisors, in addition to environmental NGOs Environmental Defense, NRDC and Ceres.
• May 2008: The Equator Principles network celebrates its five year anniversary in Washington DC with more than 60 institutions as EPFI adopters.
• Spring 2009: Citi develops a robust Mountaintop Mining Environmental Due Diligence process that is fully integrated into our credit and risk management policies and processes.

ESRM Policy Implementation and Performance

Citi's ESRM Policy serves as a model of non-traditional risk management. For transactions in emerging markets, the underlying standards are the issue-based IFC Performance Standards and the 63 sector-specific IFC EHS Guidelines.

Citi's ESRM Policy applies a rigorous environmental and social review of certain financial transactions where the use of proceeds is known. Once identified, each ESRM Covered Transaction must be reviewed and receive the appropriate ESRM risk category, which is based on the IFC's environmental and social risk categorization criteria (see box). Category A transactions, or those with sensitive environmental and social risks, require elevated review and approval from appropriate senior credit officers.

The ESRM Unit acts as a technical resource and advisor for Citi senior management and staff. The Unit is responsible for review, advice, and consultation on new transactions across the firm; internal ESRM training; policy implementation, tracking and reporting; and partnering with Citi Corporate Sustainability on external outreach to NGOs, SRIs, other EPFIs, and the media.

ESRM Covered Transactions include:

TRANSACTION / PRODUCT TYPE REQUIRED THRESHOLD AMOUNT
Project Finance Transactions (subject to the Equator Principles)	Project capital costs: Above USD 10 million
Project Finance Advisories (subject to the Equator Principles)	Estimated project capital costs: Above USD 10 million
Project Finance for Existing Projects and Refinancings	Project capital costs: Above USD 10 million
Corporate and Government Loans	Total facility amount: USD 50 million (in aggregate)
Official and Export Agency Loans	Total facility amount: Above USD 50 million
Acquisition Finance	Total facility amount: USD 50 million (in aggregate)
Debt Securities Placements or Underwritings (Bonds)	Underwriter or arranger of debt securities placements or underwritings in excess of USD 50 million (in aggregate value)
Equity Investment or   Equity Underwriting Transactions	Firm (Citi) equity investment in excess of USD 5 million Underwriter, arranger or placement agent for the selling of equity securities in excess of USD 50 million (in aggregate value)
LCs, Bid Bonds and Performance Bonds	Relevant instruments in excess of USD 50 million (in aggregate)

Sustainable Forestry Sector Standard

Citi's ESRM Policy also includes a Sustainable Forestry Sector Standard. First developed in 2004 under an Anti-Illegal Logging Initiative, the approach was refined and expanded in 2006. Under the policy, Forest Products Obligors (FPOs), defined as customers that are directly involved, as a material business line, in logging or primary processing of timber, are subject to risk management actions based on the sensitivity and location of operations. The Sustainable Forestry Policy refers to a list of "high risk" countries that have been documented to have a higher rate of illegal logging than other countries. FPOs operating in these "high risk" countries must develop a plan to achieve independent certification by a scheme acceptable to Citi within an agreed timeframe (e.g., 3-5 years).

For more detailed information on this approach, please see our Sustainable Forestry Policy.

Nuclear Sector Standard

Citi's ESRM Policy includes a comprehensive Nuclear Sector Standard, which covers new construction of nuclear facilities and the upgrading or expansion of existing nuclear facilities. All covered nuclear facilities must be evaluated against host-country environmental guidelines, and must meet relevant host-country environmental laws, regulations, and permits. In emerging markets, these facilities must be further evaluated against the international nuclear environmental guidelines that are set forth by the International Atomic Energy Agency (IAEA), including all IAEA fundamental principles, safety, and environmental management requirements.

ESRM Policy Developments

These policy initiatives reflect Citi's awareness of, and concern for, environmental, social and sustainability issues globally. In developing them, we have consulted widely with clients, NGOs, and experts; evaluated the environmental policies of other companies; and engaged many employees within Citi. Additionally, Citi's ESRM function has won commendations from the Financial Times Sustainable Banking Awards, and a Corporate Award from the International Association for Impact Assessment (IAIA). We will continue to learn from implementation and update our approach accordingly. For more details on our ESRM Policy implementation (including our implementation of the Equator Principles), please see the ESRM section of our annual Citi Citizenship Report.