Leading US financial institution, Citigroup, announced last week that they will voluntarily be cutting their global greenhouse gas emissions of their direct operations and facilities by 10% by 2011. The bank joined the EPA’s Climate Leader Program, an industry-government partnership dedicated to setting long-term greenhouse gas (GHG) emission reductions with global corporations. Companies such as Caterpillar, GAP, Eastman Kodak, Bank of America, Pfizer and General Electric have voluntarily signed on to lower their emissions. Citigroup’s first policy back in 2004 was the first in the private financial sector to recognize the role that international banks play in lowering the overall greenhouse gas footprint through their direct (facilities and operations) and indirect (investments in ghg intensive industries) emissions. Still, the original policy stopped short of setting the targets and timelines on reductions that are so critical for success in confronting catastrophic climate change.

This voluntary initiative places Citi as pursuing the most aggressive targets in the US financial sector. Bank of America’s policy commits them to 7% reductions by 2008, and JPMorgan Chase and Goldman Sachs brought new elements of the climate puzzle to the table but again declined to commit to targets and timelines on their direct or indirect emissions. The evolution of the policies in the climate sector have taught us that there is a handful of variables that go into making an effective and comprehensive strategy to confront climate destabilization which includes: prioritizing investments in clean renewable energy sources, advocating for mandatory reductions and other solutions at the federal level, and benchmarking and reducing an institution’s direct and indirect emissions.

Questions remain: exactly what sites will this commitment cover in Citi’s operations? How will the reductions be implemented, monitored, and reported? Is there a long term strategy to bring the financial institution inline with best estimates of what is necessary to stave off more climate effects? The 10% reduction, while bringing Citi to the top of the financial heap in the US falls short of industry best practice, set by HSBC bank in London who went climate neutral this year and certainly short of what best scientific models indicate is necessary.

Still, here is what we know: with this announcement, Citigroup has demonstrated one of the key elements to successful markets work around environmental issues, namely that these policies are be living, breathing guidelines that expand as the companies gain capacity, understanding, and expertise on the issue. By encouraging these types of commitments, shareholders and stakeholders can help bring the markets closer to the solutions we so desperately need to bring the Earth back into balance. By creating a climate of positive competition, we can see each financial institution strive to do better than the one before it, effectively utilizing the marketplace as a reflection of modern social values and ecological realities. Citigroup’s announcement is a modest step forward in this long term goal.