Citi Ventures is the venture investing and innovation arm of Citi, a leading global bank. The company is home to the Venture Innovation team, which in 2019 launched City Builder® by Citi, a free, data-driven platform designed to help investors, fund managers, developers, municipalities, and community members make impactful, place-based investments. The goal of the City Builder platform is to bring more transparency to key metrics that can help investors make community development–driven investment decisions.
Working through MIT Sloan’s Proseminar in Corporate Finance/Investment Banking, Citi Ventures asked five Master of Finance students to investigate ways to track environmental, social, and governance (ESG) data for its City Builder investment projects.
The students—Chester Lee, Cheng Hin Tan, Yan Qi Chiang, Peter Xie, and Min Lim—began the project by conducting background research, exploring both academic research papers and reports by institutional investors. The team also identified the target audience for ESG investing: pension funds; university endowments; hedge funds; and high-net-worth families, foundations and individuals.
Next, the students developed key metrics to consider, including climate change and human rights impacts. They also examined the ESG scoring systems developed by other companies to learn how to aggregate individual ESG metrics and how to present scores effectively. “Our biggest challenge was condensing the vast literature on ESG metrics into a select few key measures which we thought investors would be most interested in,” Tan says.
In the end, the students recommended adding new ESG filters to City Builder to enable investors to assess projects quickly through the use of “ESG impact cards”; these would indicate the degree to which projects meet key ESG goals such as conservation of raw materials and preservation of human rights.
Neel Patel, senior vice president for public-private strategy and partnerships at Citi Ventures, says the project gave the company further insight into the importance of balancing portfolios from an ESG perspective, rather than focusing on one theme at the expense of others. “Another important analysis was how investor focus varied across different categories of target audience,” he says.
For their part, the students say they learned both about ESG investing and about the value of creating clear and simple messaging. “For our midterms, we tried to cram too much information and specifics into our presentation,” Tan says. “We learned from this and for the final, we focused on making our presentation more user-friendly and informative.”
Working with the students at MIT Sloan was an engaging and enjoyable experience. We greatly appreciated their thoughtful analysis of how City Builder could be deployed to aid investors in identifying investment opportunities that align with ESG criteria and goals.