Citi Perspectives Spring 2020

Companies across the globe, and across all industry sectors, are adopting sustainable practices that are generally more resilient to shocks, more financially robust, and exhibit greater long-term growth potential. Many institutional investors have consequently seized on the environmental, social and governance (ESG) agenda as a way of determining companies’ value and potential. The adoption of ESG by mainstream investors is well underway — it is no longer solely a focus on “ethical investing.” What does this new sustainability paradigm, increasingly backed up by regulatory requirements, mean for corporates? Sustainability targets — often aligned with the United Nations 2030 Sustainable Development Goals — require companies to evolve front-to-back, across all functional areas. Initially for most companies, changes will be operational: corporates may need to switch to renewable sources of energy, invest in new technologies to reduce carbon emissions, or transition to a more sustainable business model. However, treasury as one of the most connected functions within many corporates — with strong relationships across sales, finance, procurement and other departments — has a crucial role to play in implementing change and monitoring progress. Treasury has long been focused on monitoring and measuring critical key performance indicators aligned to specific business goals such as cash conversion cycle and days sales outstanding. With the new emphasis on corporate-wide sustainability, treasury can again be a change agent connecting diverse functions and helping to steer the company on its sustainability transformation journey. Accordingly, our spring edition of Citi Perspectives is focused on sustainability. We start by explaining how Citi works to drive advances on key issues, such as climate policy, and has incorporated sustainability into our own business goals, including our $100 billion Environmental Finance Goal. And we explore how new solutions, driven by clients’ needs, can help corporates to quantify sustainability as a strategic risk and cost factor and integrate it into their business strategy. Digital channels and data solutions can help treasury support ESG principles. And trade finance can play a critical role in facilitating sourcing policies that are more sustainable, both in terms of their environmental impact and the working conditions of those involved in production; supply chain finance can be used to help incentivize suppliers to adopt more sustainable practices, helping to meet corporates’ ESG objectives. Commercial cards can now even help corporates contribute to reforestation. Elsewhere in this edition, we look at why sustainability is key to Africa’s future (and how Citi solutions can play a part), Citi’s partnership with Japan’s largest oil and gas exploration and production company INPEX (which is using reforestation initiatives to offset greenhouse gas emissions), and we analyze how ESG issues are changing the landscape of money market funds. Sustainability is set to become an ever- more important issue for corporates in the years to come. We hope the topics discussed in this edition of Citi Perspectives prompt reflection and stir debate; we value your feedback and suggestions for future coverage on this important issue. Naveed Sultan Global Head, Treasury and Trade Solutions, Citi Michael Guralnick Global Head, Marketing, Proposals, Intellectual Capital Management and Digital Client Advisory, Treasury and Trade Solutions, Citi