Global financial services company Citi facilitated $123.5 billion in sustainable finance in 2022, marking a year-over-year decline of approximately 24% in a year marked by significant macroeconomic and geopolitical headwinds, but still nearly double the activity level in 2020, according to the company’s newly released ESG Report.
Despite the decline from 2021, Citi noted that it remains “well on track” to meet its 10-year $1 trillion sustainable finance goal, with $348.5 billion financed and facilitated between 2020 – 2022. Citi announced its $1 trillion commitment in 2021, including goals to deploy $500 billion to environmental finance by 2030, and $500 billion for other Sustainable Development Goals (SDGs) areas including education, affordable housing, health care, economic inclusion, community finance, international development finance, racial and ethnic diversity and gender equality.
The report of the decline follows a similar announcement from JP Morgan earlier this month, which experienced a 30% decrease in sustainable finance activity in 2022.
By category, environmental-related finance represented nearly all of the decline in 2022, with activity down by approximately $37 billion, or 30% from the prior year to $86.7 billion. Within the environmental category, sustainable transportation accounted for almost half of the decline, falling to around $29 billion from $47 billion in 2021, after a rapid rise from less than $4 billion in 2020. Renewable energy fell slightly to $17.3 billion from $19.6 billion last year ($7 billion in 2020), while clean technology emerged as a rare bright spot, rising to $2.5 billion from $0.6 billion in 2020 and 2021 combined.
By business unit, Investment Banking’s sustainable finance activity fell by $43 billion, representing more than the entire decline in Citi’s activity, driven by a $22.5 billion decrease in mergers and acquisition to $34.9 billion, and a $20.3 billion reduction from Debt Capital Markets, as green, social and sustainable bonds fell by over $17 billion, and sustainability-linked bonds and loans declined by more than $4 billion. Partially offsetting the Investment banking decline was an increase in corporate lending, which grew 39% in the year to $14.2 billion.
On a regional basis, Citi’s sustainable finance activity fell sharply in North America, declining by more than half to $45.6 billion from $95.3 billion in the prior year, while activity picked up significantly in the Europe, Middle East and Africa region, growing by more than 30% in the year to over $58 billion.
In its ESG report, Citi noted that while the bond market saw a challenging year in 2022 with rising interest rates and economic uncertainty, sustainable debt issuance, while down, “remained resilient compared to non-ESG debt issuance.” Citi added that it is “seeing consistent sustainable finance activity that meets multiple sustainability criteria,” and noted that it sees consistent volumes in social finance, increase demand for blended finance instruments, and a growing focus on the energy transition.
Citi CEO Jane Fraser said:
“At Citi, helping our clients navigate the challenges and embrace the opportunities of our rapidly changing world is fundamental to our mission of enabling growth and economic progress. Importantly, it’s also vital to our own business and central to how we deliver for our clients and help them sustain their businesses for the future.”