Financial institutions have escaped the wrath of nonprofit environmental organizations for many years, but they'd better be careful.

Unlike their colleagues in the oil business, financiers have rarely faced the threat of boycotts and activist protests. However, the situation is changing rapidly, and it could cost them billions of dollars and much bad publicity.

In the 1990s activist groups became increasingly interested in the work of the multilateral financial institutions -- publicly financed banks and organizations such as the World Bank, the International Monetary Fund, and the World Trade Organization. As a result they began learning about global financial flows, banking, lending, underwriting, and their impact on development.

Years of campaigns finally came to a head during the huge protests in Seattle and the nation's capital last year that made the front pages of major newspapers around the world. What has not been front-page news, however, is that a similar process is now under way, and this time the activists are targeting private financial institutions.

In many ways this was to be expected as the logical extension of campaigns against the World Bank or the WTO. Sooner or later activists were bound to realize that most of the money flowing to developing countries comes not from multilateral organizations such as the World Bank, but from the private financial sector.

The numbers could not be clearer: According to the World Bank and the IMF, before 1990, 80% of the money flowing to developing countries was coming from governments, while 20% came from the private sector. After 1991, however, government money began to dry up and private financing grew at an astonishing rate. By last year those numbers had been reversed.

Now 80% of the money flowing into developing countries comes from the private sector, the rest from government sources. The implications of this shift have not been lost on the activist groups.

To deal with the fact that the projects they cared about were being financed by the private sector, and not the World Bank, nongovernmental organizations (NGOs) began learning more about the way money was moved and projects were financed. They produced training sessions on finance, published booklets on project finance, and organized campaigns targeting major banks.

All of this has culminated in major initiatives aimed at global institutions including Citigroup Inc. and Goldman Sachs Group Inc. Coincidentally, two of these relate to projects in China.

The first campaign stemmed from environmental and social concerns surrounding the construction of the world's largest hydroelectric project, Three Gorges Dam in China, which environmentalists have seen for years as a major threat to the local environment. Some have even dubbed it the "Chernobyl of hydropower."

At first NGOs used their usual tactics -- they lobbied the World Bank, contacted the Chinese government, etc. The World Bank soon announced that it would not provide money to this project, but it became clear that the Chinese government was impervious to the NGOs' attacks. So they revised their tactics. They began finding out where China was getting the money to build this dam.

This brought them rather quickly to Wall Street. They saw that in 1997 Morgan Stanley Dean Witter & Co., Credit Suisse First Boston Corp., Salomon Smith Barney (now part of Citigroup), and BancAmerica Securities (now part of Bank of America Corp.) underwrote a bond worth $330 million issued by the state-owned Chinese Development Bank. Part of this money, they saw, was to be used to finance construction of Three Gorges.

So the activists began to see if they could influence the work of these capital sources.

They began by writing letters and making phone calls. When this didn't work they resorted to shareholder activism. They built alliances with institutional shareholders, socially responsible investors, and others to put forward shareholder resolutions at the companies' annual meetings.

As a result of these campaigns, several of the financial companies agreed to talk to the NGOs. The pressure was so strong that several financial institutions sought (and were given) assurances from the Chinese government that money they helped raise would not be used for Three Gorges.

The dialogue around Three Gorges continues to this day. More important, the groups began to see that financial activism gave them considerable leverage, so they began looking into major private banks' involvement in other development projects around the world.

Eventually this research led to a campaign targeting Citigroup coordinated by the California-based Rainforest Action Network, which called for people to boycott the company and mail it their cut-up Citigroup credit cards.

Make no mistake: These campaigns can cause substantial damage, and not just in public relations. Consider the case of Goldman Sachs and PetroChina.

Last year Goldman Sachs was chosen to help underwrite the sale of American depositary receipts in China's restructured state oil company, PetroChina. A source close to the deal said Goldman had initially hoped that the IPO would raise $4 billion to $5 billion.

As it turns out, numerous environmental groups, human rights activists, and labor unions were concerned with China's human rights record and with PetroChina's activities in Tibet and Sudan. To make their point, they contacted institutional investors and asked them not to invest in PetroChina. They picketed meetings at Goldman Sachs, filed shareholder resolutions, and had their colleagues write letters to the company.

In the end, partly because of these activities, the PetroChina IPO raised $3 billion, over $1 billion less than had originally been projected. In other words, being in the activist spotlight cost the deal anywhere from 25% to 40% of its original value and turned out to be an embarrassment to China and the bulge-bracket investment banking firm. Not good for company PR.

For activist groups, on the other hand, PetroChina provided a taste of the power and leverage that was to be had by targeting banks and other financial institutions.

The Three Gorges, Citigroup, and PetroChina campaigns are likely to be the first of many. Financial institutions may have flown underneath activist groups' radar in the past, but they need to realize that these groups have upgraded their radar systems. Bankers should learn to manage NGO campaigns or else be prepared to lose money and face a steady dose of boycotts and protests.