BMO GAM calls for wider investor collaboration to tackle systemic sustainability issues

• Over half (54%) of milestones achieved are against corporate governance themes, with corporate governance, climate change and environmental stewardship dominating engagement
• Banks, Oil and Gas, and Retail were the most engaged sectors during this time period

London – BMO Global Asset Management (BMO GAM) this year marks 20 years of engagement. It sets out in a new report its track record over the past two decades, and expectations for engagement in the years ahead.  

Over time BMO GAM’s engagement has increasingly focused on measurable social and environmental impact, with three quarters (72%) of BMO GAM’s current engagement now linked to the UN Sustainable Development Goals (SDGs). The remaining 28% focuses on corporate governance, which BMO GAM views as an essential building block to creating a more sustainable economy.

Engagement highlights

Highlights from the past two decades include:

• Engaging companies across geographies: companies in 87 countries engaged
• Comprehensive company-level engagement: 5,588 companies engaged
• Integrating ESG into strategy: 47% of engagement at Board or senior executive level
• Delivering positive outcomes: 3,763 instances of positive change in ESG practices

Banks, Oil & Gas, and Retail were the top three most-engaged sectors with 2,691; 2,067 and 1,313 engagements recorded within each sector respectively. BP, HSBC Holdings and Tesco were the top three most-engaged companies with 191; 184 and 177 engagements recorded respectively.

Engagement by ESG theme reveals corporate governance, climate change and environmental stewardship dominated BMO GAM’s engagement in the past 20 years. Over half (54%) of milestones achieved were against corporate governance themes, with a fifth (18%) of milestones relating to climate change, and a tenth (10%) relating to environmental stewardship. Business conduct, labour standards, human rights and public health also remained a focus for engagement, in line with achieving the SDGs.

Alice Evans, Co-Head Responsible Investment at BMO Global Asset Management, said: “There is growing recognition that whilst of course delivering financial returns is our objective, we also need to analyse how our actions – or inactions – have an impact on meeting the world’s needs. Engagement is a powerful tool to ensure these global needs are met. Encouragingly, we have seen significant development in both the industry’s approach to engagement, and asset owners’ appetite for engagement-based investment strategies, over the past 20 years.

“The global financial crisis was a turning point for improving engagement practices, with investors questioning why they didn’t do more to challenge weak governance structures and excessive risk-taking. This prompted investors to revisit their approach to stewardship and take a stronger stance in their asks of companies. We’re now seeing a similar effect with the Covid-19 pandemic, as businesses, investors and governments consider how to rebuild through a responsible lens. Engagement will be a crucial ingredient to achieving a ‘green recovery’ in the wake of the pandemic, and we expect companies to be held to greater account on their ESG commitments as a result.”

Engagement reaching maturity

BMO GAM identifies three phases in the progression of engagement practices, and has been involved with responsible investment throughout this time period, launching Europe’s first social and environmentally screened fund in 1984:

• 1980s – 2000s: early engagement and shareholder activism largely driven by mission and faith-based investors;
• 2000 - 2010: engagement enters the mainstream, with the launch of the Principles of Responsible Investment[1];
• 2010 – 2020: engagement reaches maturity with growing evidence of a link between ESG credentials and financial return, and momentum behind global sustainable challenges.

The next 20 years for engagement

Looking ahead, BMO GAM predicts a fundamental shift in perspective in the next two decades, from viewing stewardship as the relationship between investors and individual companies towards looking more holistically at responsibilities for shaping the market and economy as a whole.

On average, 20% of BMO GAM’s engagement activities each year are through collaborative initiatives, BMO GAM predicts these collaborative initiatives will increase as work begins with a wider pool of stakeholders in order to create meaningful change.

Kristi Mitchem, CEO at BMO Global Asset Management said: “Active ownership has proven its worth as a valuable and legitimate financial tool. At BMO we view engagement as a critical driver of enhanced performance and a route to creating positive impact for the environment and society. In the coming decade, we expect a focus on real-world outcomes of engagement, as we move towards the 2030 target date for the achievement of the Sustainable Development Goals (SDGs).

“For investors to address systemic challenges, such as climate change, there will need to be a sharper focus than in the past on public policy, widening engagement beyond the company level to build relationships with new stakeholders, including NGOs and academic experts. A collaborative approach between investors is key to making this a success, both to muster the resources to make these changes and to present a unified voice to increase influence.

“Through our commitment to responsible investing, we believe we are playing our part in the movement towards making finance a force for good.”

BMO GAM has 20 sustainability experts within the Responsible Investment team and USD $4.4bn[2] under management in ESG specialist funds.

To learn more about BMO GAM’s early engagement and case studies you can download a copy of the report – ‘Influencing for good: Lessons from 20 years of engagement’ - here.

-Ends-

Media Contacts:
Campbell Hood
campbell.hood@bmogam.com
FTI Consulting
bmo@fticonsulting.com

About BMO Global Asset Management  

BMO Global Asset Management is a global investment manager with offices in more than 25 cities in 14 countries, delivering service excellence to clients across five continents.

Our four major investment centres in Toronto, Chicago, London and Hong Kong are complemented by a network of world-class specialist managers strategically located across the globe: BMO Real Estate Partners, LGM Investments and Pyrford International Ltd.

BMO Global Asset Management is a signatory of the United Nations-supported Principles for Responsible Investment initiative (UNPRI).

BMO Global Asset Management is a part of BMO Financial Group, a highly diversified financial services provider based in North America with total assets of CDN $987 billion as of 30 April 2020[3].

© Press Release 2020