Counting down the gigatonnes: Tuffley on Citi’s low carbon transition
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Counting down the gigatonnes: Tuffley on Citi’s low carbon transition

Leaving investment banking to join the world of impact investing and environmental NGOs is not something people do lightly. But having made that move a decade ago, Keith Tuffley has been tempted back, to help shape the response of Citigroup’s investment bank to the accelerating rise of sustainability.

Tuffley joined Citi in February 2019, just as awareness of the threat of climate change and its impending transformation of the economy was surging to the top of the corporate agenda.

Now global co-head of Citi’s sustainability and corporate transitions group, he talks to GlobalCapital about how a big, complex investment bank with a string of clients in coal, oil, gas and other high carbon industries can embark on its intended transition to net zero financed emissions by 2050.

Tuffley is no newcomer to green issues. As a lawyer and then investment banker in the 1990s, he rose to run investment banking for Goldman Sachs in his native Australia, then led its industrials group in Europe.

But in 2008, he left the industry and plunged into a multitude of activities with start-ups and NGOs, clustered around his belief that humans must take better care of nature and each other. He founded NEUW Ventures, an impact investor; worked with organisations preserving the Australian bush and Great Barrier Reef; and chairs the Global Footprint Network, which promotes the idea of organisations measuring their ecological footprints.

In 2014, the entrepreneur Richard Branson recruited Tuffley to be CEO of an unusual NGO he had set up — the B Team — which works directly with corporate leaders to steer companies onto more sustainable, socially conscious paths and influence policy. In that role, Tuffley contributed to the We Mean Business coalition which helped launch the Sustainable Development Goals.

He has also skiied to the North Pole and cycled unassisted to the South Pole.

Two years ago, Manolo Falco and Tyler Dickson, co-heads of Citigroup’s then newly formed banking, capital markets and advisory (BCMA) division, hired Tuffley as vice-chairman of Australia and New Zealand and as a senior international adviser, including on environmental, social and governance (ESG) matters.

As Tuffley explains, the role swelled from there, as the bank has been deluged by requests from clients wanting to get ahead of the wave of sustainability consciousness sweeping capital markets.


GlobalCapital: You’ve come back to banking after 11 years away — how do you think the industry has changed?

Keith Tuffley: I had no intention of coming back into banking. I left because there was no ability to really effect change inside a bank. I had a day job in which nearly all my work was inconsistent with the sustainability priorities I had and have. I wasn’t spending any time on these issues. We need traction on climate, biodiversity, reducing inequalities, but in the ’90s and 2000s, it was impossible to do that if you were an investment banker.

So I retired, to explore ways I could have positive impact — but that were consistent with capitalism. You can’t have a battle between environmentalism and capitalism, because capitalism will always win that one. So we’ve got to reframe capitalism.

I joined The B Team about a year before the Paris Agreement. It was very much about advocacy, something I hadn’t done as a banker. Because we were a group of 25 CEOs all committed to the cause, our role was to be at the forefront, advocating to governments and policymakers.

We and other NGOs worked to convince investors to get behind the push for a strong Paris Agreement. We succeeded in getting two key phrases into the Agreement: it says well below 2°C and pursuing efforts towards 1.5°C, and it talks about net zero in the second half of this century.

I had a sense that things were changing in the financial world. Citi approached me, and I really enjoyed meeting some of the key individuals such as Manolo Falco and Tyler Dickson. I thought: “this team gets it — let’s scale it up”.

So we set up a new business unit within the banking, capital markets and advisory group. The idea was to operationalise solutions — whether in oil and gas or thermal coal or renewables or green hydrogen — how can we help them become more sustainable? How can we achieve the Paris Agreement in a way that’s good for society?

It’s been fantastic — now everyone is listening. ESG has risen to the top of the agenda, even issues like biodiversity — it’s a huge difference from when I retired. It’s not just Citi — it’s great to see so many companies responding. But global emissions haven’t peaked yet — we’re still pumping out 51bn tonnes of CO2 equivalent a year and we need to get these to net zero in the next 20 to 30 years.


You’re running the sustainability and corporate transitions unit. Normally a department in an investment bank is selling a product. So what’s your team’s product?

I joined in February 2019. We did not know what it would look like, but we knew all these industries were going to change and the banking world had to take a major role.

It took a good 10 months to think through the best way for us to have real impact. We employed people and formally launched the team in May 2020 with my co-head Bridget Fawcett, who’s been at Citi many years, and is based in New York, and significantly, is also BCMA’s chief strategy officer. Bridget is an incredible partner for this business.

The first thing is to realise that this is now an issue that every CEO and board has to do something about. It’s no longer a small issue for the sustainability department. It has become a strategic issue.

How do you transition an oil and gas major? It’s really tough — and there are so many sectors that have to transition: coal, steel, cement, autos, shipping, aviation — also food and agriculture, which is such a big emitter.

No one really knows how they’re going to get there. Some companies will unintentionally or intentionally go out of business — they may go into managed decline. So we have to be in the boardroom giving trusted advice.

We have very good senior bankers — we’ve now got to instil sustainability solutions into that advice. That means training senior bankers, making them aware, giving them tools. An example is the recent International Energy Agency Net Zero by 2050 report — we’re sitting down with a lot of bankers to go through it.

The second pillar is financial innovation. Green bonds are a good innovation, but they’re not a silver bullet. There is no silver bullet — or even 10.

So KPI-linked bonds were introduced by Enel. We were involved, and since then have been promoting them — and sustainability-linked convertibles. We were one of the banks that helped Schneider Electric launch the first one.

We’re also working on sustainability Spacs — that has been a really effective way to shift capital to high growth industries — electric vehicles, hydrogen-powered trucks, other zero emissions transportation systems. Up to 20% of Spacs have had ESG or sustainability as a driver.

The third element is supporting new technologies. This decade there is going to be a whole range of innovations, from carbon capture, usage and storage, green hydrogen, blue hydrogen and direct air capture to sustainable food systems and plant-based food. There’s a whole swathe of companies which are very mission-driven and have a deep view about their role on the planet.

Probably the most important goal is scaling this effort and embedding sustainability thinking into all our sector, country and product teams. We’ve now got 20 bankers in London, Switzerland and North America. And we’ve got about 120 ESG champions — hand-picked individuals in each team.

We have set up a Sustainability Client Council — many of our very senior M&A advisory bankers are members. Some embraced it from day one, others were at the other end of the spectrum. But even the most sceptical ones have realised the clients are demanding advice. Money does talk — when bankers realise there are transactions, it starts to shift them.

Our oil and gas bankers in Houston have embraced this — we’ve set up a Natural Resources and Clean Energy Transition Group. They’ve realised it’s about energy transition, rather than pumping oil forever, and it’s a credit to them that they have embraced the future opportunities and are providing well informed advice to our energy clients.

Citi has made a net zero commitment, which Jane Fraser did on her first day as CEO in March. What does that mean for a big bank like Citi, which is listed as the second biggest fossil fuel financing bank? You lead deals for clients in the coal industry, such as Newcastle Coal Infrastructure Group in Australia and EPH in the Czech Republic. Are you helping Citi deliver that net zero commitment and start to manage down its carbon footprint?

Absolutely, it is a core part of our team’s role. We’re very excited by Jane’s announcement.

What it means firstly is that we’ve got a clear vision of where we as a bank need to get to. A net zero commitment mobilises companies and employees. But you’ve got to bring it back to the short term because it’s not about 2050. It’s actually what we do today, in order to get to net zero by 2050.

Number two, it’s a recognition that we are a facilitator for change, an accelerator of change. We’re at the heart of the capital allocation system, as a lender, but also as an adviser, a capital markets transactor, an underwriter — we also have lots of interactions with high net worth individuals.

Thirdly, we know it has to be collaborative. We want other banks to accelerate as well. That’s why we helped to instigate the Net Zero Banking Alliance. We had been working for many months to try to get it going, and it was launched in April. Forty-three banks made a commitment to put in place decarbonisation commitments for our financing by 2030.

So we’re working on that now with the NZBA and making alliances, to come up with a plan across multiple sectors, to have decarbonisation targets for those sectors by 2030.

That has to be in consultation with our clients. It’s not about running away from the problem, shifting our whole loan book to low carbon emitting sectors — that’s not actually the right answer. We need to actively help our clients transition. But it does mean we have to work with them.

And as Jane Fraser said: “if clients aren’t prepared to transition, we have to think about what that means for our relationship”.

On thermal coal we’re putting all the operators on notice that they have to transition. We’re going to bring our loan book down by 50% by 2025, and down to zero by 2030. We’ll be doing no advising or capital markets transactions for them after 2025.

In the meantime, we can do capital markets transactions and often we’re a lender too. We’re using that leverage to encourage them to change.

The IEA report was a good example of that. We’re committed to helping them be more aware of the issues and the speed of change and of international expectations, and helping them transition as quickly as possible.


Coal is important, but oil and gas are bigger, and the transition is at an earlier stage. The IEA report says there’s no need for more expansion of any fossil fuels. So do you think are we going to see the oil and gas industry actually turn a corner in the next couple of years?

Yes. We have approximately 300 gigatonnes of carbon dioxide equivalent left in the budget, if we’re to achieve with a high degree of certainty the 1.5º target. At the same time, we’ve got proven reserves of oil, gas and coal of about 3,000 gigatonnes. So one 10th of the proven reserves can actually be burned. Beyond that we are going beyond 1.5º.

Until recently the world was spending $680bn a year on upstream oil and gas activities. A significant portion of that was on exploring for more reserves, when we couldn’t even burn 10% of what we had.

This bizarre situation is caused by a lag effect. The scientists are saying 1.5º, but the energy industry is embedded in exploration and development. That’s what they do, right? The whole idea was you have a depleting business, so you’ve always got to find more than you extract.

That whole mindset is now changing. The logic of spending more on exploration and development is largely gone.

It also means there should logically be better cashflow coming out of these businesses. They’ve got a choice now. They can reinvest that cash, which would otherwise be spent on exploration, into new energies — offshore wind, solar, green hydrogen, geothermal, bioenergy.

Or they can start returning cash to shareholders — or a bit of both.

So that’s what faces the industry. Five years ago, the Paris Agreement was there in writing. But it wasn’t in the mindset, it wasn’t in the actions. But now, we’re past the point of inevitability and things are accelerating rapidly. Even the most cautious companies are now realising a material change has to occur — we’ve seen it with shareholder actions. We’ve seen some really progressive investor action, like what Climate Action 100+ is doing.


The EU has developed a sustainable finance Taxonomy. Canada’s developing its own, and people are wondering if the US will have a taxonomy. Do you think this is helpful — or a waste of time?

I think it is helpful. It has to be a good process, it has to be very consultative, which it has been, and hopefully we end up with the right decisions and it helps everybody to better understand what is green and what is not.

But also the different shades of green. There is an impact from whatever we do. Scaling up offshore wind, a fantastic renewable energy resource, requires an enormous amount of steel. This is not just a climate issue, it’s also about nature, biodiversity and resource use. When you see these photographs of swathes of pristine land being covered by solar panels — it’s not net zero.

So nothing is perfectly green. Everything is in a spectrum. And the Taxonomy has helped bring that debate out.

For example, the ongoing debate about whether methane gas is a transition fuel. I think it’s a transition fuel, but it’s probably going to be a much shorter transition than many people think.

In certain markets and circumstances to help with intermittency gas can be helpful. But recognising the progress we’re getting with batteries, with combined solar and hydrogen, we’re finding ways in which we don’t need to have significant amounts of gas. We’ve got 300, 400 gigatonnes to gowe just don’t have the carbon budget to allow that.

The development of a taxonomy helps bring those definitions out for everyone. It would better if it was a single global system, so we have consistency, but hopefully we’re heading in that direction.


Racial equality, diversity and inclusion have always been important, but have clearly had an upsurge of attention in the last year. How do you deal with that as a firm — is that part of your activity in your department?

Bridget’s and my primary remit is all of our client engagements on all of these ESG issues. We often get questions about what we as a company should be doing. And one of the themes on the social side is what you can do within your company to drive positive change around gender diversity, racial diversity, diversity of thinking, but also externally with your local community. Companies like Unilever driving positive change through their entire supply chains, to reduce inequalities — it’s those sorts of actions we definitely encourage.

Companies want to break down environmental, social and governance issues and ask: are we doing things right? Are we getting the right ESG scores from the rating agencies? We give a lot of advice to clients on that area.

Like the energy issues, it’s part of the sustainable revolution we’re going through. Investors are gradually recognising this is a systemic shift, not just a little trend. We’ve got to rethink our capital system, and how we fit 10 billion people on a small planet.


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