Citi Perspectives Spring 2020

Jessica Cavalletto Trade Sales, Treasury and Trade Solutions, Citi Consumers and corporates alike are increasingly focusing on environmental and sustainability practices when making financial decisions. In fact, consumer demand for ethically and sustainably-sourced products has led to corporate social responsibility (CSR) commitments that reach across industries and supply chains. This in turn has led more and more businesses to consider incorporating environmental, social and governance (ESG) factors into their trade and finance decisions. The pressure is not just coming from consumers. More and more investors are incorporating ESG factors into their investment processes. The signatories to the UN Principles for Responsible Investment (PRI) — who have publicly committed to integrate ESG factors into their investment processes — now have combined assets under management (AUM) of some $83 trillion ( www.citivelocity.com/citigps/purposeful-innovation-finance/ ). Forbes recently reported that more than 80% of mainstream investors now consider ESG policies when making investment decisions. The publication goes on to state that currently there are $22.89 trillion in assets globally being professionally managed under responsible investment strategies, which is a 25% increase since 2014. 1 As a result, regulators are working on initiatives such as the EU taxonomy for sustainable activities with the aim to build policies around disclosure of sustainability practices and the integration of sustainability risks in the decision- making process of corporates, financial institutions and investors. This leads to one key question for treasury and finance professionals: When it comes to world trade, with its millions of transactions across multiple jurisdictions and highly complex supply chains, how can ESG goals be met? How can success be measured, audited, reported, and made to comply with the standards of transparency the market increasingly demands? 1 Source: https://www.forbes.com/sites/susanmcpherson/2019/01/14/corporate-responsibility-what-to-expect-in- 2019/#5196d08690f4