Citi says 42% of energy clients lack climate transition plans

By Isla Binnie

NEW YORK (Reuters) - Almost half of the energy companies Citi lends to are lacking plans to cut greenhouse gas emissions, the fourth-largest U.S. bank said in a climate report released on Thursday.

Banks are combing through their loan books for information on the risks businesses face from climate change and how they are preparing to shift to a lower-carbon economy, as regulators around the world increase their own demands for disclosure.

Citi ranked the energy companies in its loan portfolio from "low" to "strong" on the basis of their plans to reduce emissions across three categories, known as scopes.

In 42% of cases, it found "absence of a substantive transition plan," and a lack of disclosure of Scope 3 emissions, which are released into the atmosphere from companies' supply chains and customers. Those gases usually represent 70% of their carbon footprints, according to Deloitte consultants.

Citi found just 8% of its energy clients had a "comprehensive and ambitious transition plan targeting Scopes 1-3 emissions reductions and demonstrated ability to execute." The proportion rose to 37% when Scope 3 emissions were excluded.

The analysis, started last year, is based on data from 2021. Chief Sustainability Officer Valerie Smith said she expected the timing of data collection and analysis to improve.

"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.

Like many other large banks and companies, Citi has set a "net zero" target - for business it finances to lead to no more greenhouse gas emissions than can be absorbed by technology or natural systems like forests - by 2050.

(Reporting by Isla Binnie and Tatiana Bautzer; Editing by Bill Berkrot)