Citigroup agrees to audit of investments in minority communities

Citigroup on Friday said that it has agreed to participate in a racial equity audit that will assess the impact of the company’s efforts to help close the racial wealth gap in the United States.

The decision — which comes six months after a large minority of Citi shareholders voted in favor of such an audit — makes Citi the first major U.S. commercial bank to agree to an outside investigation of how it does business and invests in nonwhite communities. Morgan Stanley and BlackRock, facing shareholder pressure, agreed to similar audits earlier this year.

The investigation will be conducted by attorneys at Covington & Burling, according to an external blog post on Citi’s website. It will focus on the company’s 2020 pledge to spend at least $1 billion to provide banking access in communities of color, increase investments in Black-owned businesses, expand affordable housing and homeownership among Black Americans and advance anti-racists practices within the company and throughout the financial services industry.

Bloomberg

The company said that it will release the results of the investigation when it is completed.

“Conducting an audit of our [racial wealth gap] initiative will help us assess the impact our work is having and will help inform how to adapt and grow our work to address the racial wealth gap,” Edward Skyler, Citi’s executive vice president of global public affairs, said in the blog post.

Shareholder support for racial equity audits ticked upward last year after the murder of George Floyd and the massive financial pledges made by banks and other companies to address racism and inequality.

Last spring, the shareholder group SOC Investment Group, formerly known as the CtW Investment Group, pushed for third parties to grade banks’ lending operations and philanthropic commitments, and while none of its proposals passed, the group was encouraged by the fact that a sizable minority of shareholders were in favor of independent investigations.

SOC Investment Group is a coalition of unions that works with pension funds and seeks to address what it calls "irresponsible and unethical corporate behavior and excessive executive pay."

At Citi, executives recommended that shareholders vote against the proposal, pointing to racial equity programs that were already in place. However, excluding those who abstained from voting, more than 38% of shareholders supported the idea of racial equity audits.

Meanwhile, nearly 40% of JPMorgan Chase shareholders, 26.5% of Bank of America shareholders and about 13% of Wells Fargo shareholders voted in favor of the audits.

On Friday, SOC Investment Group said Citi is “taking a critical step toward confronting centuries-old harms against marginalized communities that are still present to this day.”

“We look forward to partnering with Citigroup to address these concerns to pave the way for a financial industry that understands entrenched racial inequity, changes the way it conducts business and invests in the communities it serves to close the racial wealth gap,” Dieter Waizenegger, executive director of SOC Investment Group, said in a news release.

SOC is expected to keep talking to the other big banks about racial equity audits in coming months.

The forthcoming racial equity audit at Citi will mark the second time in recent years that the company has taken the lead on certain diversity, equity and inclusion issues. In 2018, it became the first big bank to publicly disclose the pay gap between men and women, and it has proceeded to disclose those figures every year since.

The racial equity audit will include feedback from Citi employees who are involved in implementing the company’s $1 billion-plus pledge as well as civil rights organizations, Citi said.