Under its new guidelines, New York-based Citigroup said it will not finance projects "located within critical natural habitats" unless borrowers can show they "will not significantly degrade or convert the critical natural habitat."

Citigroup also agreed not to finance commercial logging operations or the purchase of logging equipment for use in tropical rainforests. It also pledged to protect "high caution zones" that might suffer ecological or social damage if development were to occur.

In a statement, Citigroup Chief Executive Charles Prince said the bank "can make a difference by holding ourselves accountable for our own impact on the environment," and by "engaging in the public domain on these issues."

The new guidelines are more restrictive than the so-called "Equator Principles" drafted by International Finance Corp., the private-sector arm of the World Bank.

About 10 U.S. and European banks, including Citigroup, Britain's Barclays Plc (BARC.L: Quote, Profile, Research) and Holland's ABN Amro Holding NV (AAH.AS: Quote, Profile, Research) , had supported these principles.

The Rainforest Action Network has in the past taken out full-page newspaper advertisements criticizing Citigroup's environmental practices, and last year ran critical TV ads featuring actors Ed Asner, Susan Sarandon and others.

Citigroup's new policy is described at http://www.citigroup.com/citigroup/citizen/environment.