Stewardship report Q3 2021 - Responsible Investment Solutions - BMO Global Asset Management
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Responsible Investment Solutions Stewardship report Q3 2021
Contents Welcome 3 Proxy voting in review 4 Our engagement highlights 6 Engagement and the Sustainable Development Goals 7 Engaging for climate action 8 Engagement on environment 14 Engagement on social issues 16 Access our insights 18 SDG engagement appendix 22 Contact us 24
Responsible Investment
Welcome
Hello and welcome to our Q3 2021 Stewardship Report.
The latest report from the Intergovernmental Panel on Climate Change (IPCC)
served as a stark reminder of the need for urgent and bold action on climate
change. Hailed by the UN Secretary-General as “a code red for humanity”, the
study warns that we are at imminent risk of hitting the internationally agreed
threshold of 1.5°C above pre-industrial levels. Unless rapid and deep reductions
in carbon and other greenhouse gas emissions occur in the coming decades,
achieving the goals of the Paris Agreement will be beyond reach.
We continue to dedicate significant resources to engaging on climate change,
particularly through investor collaborations, pushing companies to pursue the
most ambitious emissions reduction paths.
This quarter, we engaged energy giants such as Reliance Industries, Shell and
TotalEnergies on their energy transition plans; continued our work with financial
institutions such as Barclays, Ping An Insurance and Bank of America on
their approach to financed emissions; and initiated engagement with European
real estate companies on their energy efficiency strategies. We also contributed
actively to the Institutional Investors Group on Climate Change’s (IIGCC) sector
strategy for steel, which sets decarbonisation expectations for the industry in
line with International Energy Agency (IEA) 2050 scenario; and signed an investor
statement on physical climate risk management, also led by the IIGCC.
We would also like to highlight the significant work we have done these past few
months to develop a robust strategy to achieve our own net zero ambition. Such
a strategy will have implications for our approach to climate change engagement,
which we outline in this report.
Finally, we would like to remind our readers that we have been and will
continue to be part of the collective investor voice calling on governments to be
visionary and ambitious in the way they approach the upcoming Glasgow COP26
negotiations. Strong action now is essential to set the world on a trajectory to a
more stable climate and a healthier planet.
Alice Evans Claudia Wearmouth
Managing Director, Managing Director,
Co-Head, Responsible Co-Head, Responsible
Investment Investment
previous continue 3
BMO Global Asset Management
Proxy voting in review
The third quarter offers a level of respite in terms of shareholder
meetings, book-ended by the end of the peak UK voting season in early
July and the start of the Australian/NZ, South African peak voting season.
It is also the quarter when detailed voting policy reviews and planning for
the following year takes place.
Share voting results* Milestones achieved by issue
Company meetings voted 1,696 Directors & Board
Items voted 12,948 effectiveness 38%
Board diversity 12%
For 82.1%
Against 15.8% Shareholder rights
Abstain 0.8% and transparency 50%
Withhold 3.2%
Source: BMO Global Asset Management, as at 30-Sep-21
Q3 case studies
Wizz Air Holdings plc – AGM 27 July 2021
targets in executive compensation structures for the company.
We voted against the proposed value creation plan that would The resolution, filed by the Australasian Centre for Corporate
result in an award equivalent to £50m being made to the CEO Responsibility (ACCR), was supported by approximately 53% of
subject to performance conditions. The primary target involved votes cast.
doubling the current share price. This would result in a pay out
of around £100m. We considered the award to be excessive Electronic Arts Inc – AGM 12 Aug 2021
considering sectorial levels of pay. Approximately 32% of votes
The company had its say-on-pay resolution voted down
cast did not support the resolution.
in 2020. The 2020 say-on-pay vote received the support
of only 25.9% of votes cast, which is particularly low.
AGL Energy Ltd – AGM 22 Sept 2021
Despite positive changes being made to the pay structure
AGL Energy Limited provides energy and other services to of the executives, we did not consider there to have
residential, small and large business, and wholesale customers been sufficient progress to warrant support of the pay
in Australia. At the 2021 AGM two shareholder proposals made it resolution this year. We were particularly concerned by the
onto the agenda. Having considered the proposals, we elected enhanced equity award to the CEO of US$30m and maximum
to support one of the resolutions that related to the setting of annual incentive pay out of US$5m. Approximately 56% of
Paris-aligned emission goals and the implementation of climate shareholders voted against the resolution.
* This report has been compiled using data supplied by a third-party electronic voting platform provider. The statistics exclude ballots with zero shares and re-registration
meetings. Meetings/ballots/proposals are not considered voted if: ballots have been rejected by voting intermediaries (e.g. where necessary documentation (such as
Powers of Attorney, beneficial owner confirmation, etc.) was not in place); instructed as “Do not vote” (e.g. in share-blocking markets); or left uninstructed.
4 BMO Global Asset Management
A look back at the European 2021 Voting Season
The third quarter offers the Responsible Investment team the One example of this was the Royal Dutch Shell management
opportunity to look back at how the voting season went from proposal. Whilst comfortably passing at the meeting, it
their perspective and analyse matters in investor and issuer did receive the lowest level of support and was the only
behaviour. This assists us in understanding the direction of European say-on-climate resolution to receive less than 90%
travel for different topics and allows us to assess the impact of shareholder support. There is much discussion around how
of voting and engagement strategies are having around often companies will come back to investors to seek approval,
the world. with some planning on annual resolutions covering the topic.
The European voting season runs from March to the May for Remuneration has continued to develop as a topic in mainland
the majority of countries, with the UK having a smaller yet Europe. Whilst investors have been used to having an annual
significant increase in meetings during July. As expected, 2021 advisory vote in the majority of markets, we have now seen
saw sustainability issues, particularly climate change, come to remuneration policy votes implemented – although these
the fore on meeting agendas. With many countries still reeling often only appear on the ballot at least once every three or
from the Covid-19 pandemic, we also saw a continued focus on four years. Despite being slower than other major European
executive pay outcomes, with several large companies held to countries to implement a remuneration policy vote, German
task for inappropriate decisions. companies did propose a number of these resolutions during
the voting season. Deutsche Telekom and Adidas were two
We observed close to 20 companies across Europe propose
prominent DAX30 companies that received notably low
a ‘say-on-climate’ resolution for shareholder approval.
support for on pay. Again due to slower implementation
Whilst a handful of similar resolutions have been seen on
than others, we will see annual remuneration report votes
other markets, this does appear to currently be a European
become common in Germany from next year. In the UK, a
developing practice. Whilst we are supportive of companies
higher proportion of remuneration policy votes received a
proposing a say-on-climate resolution, particularly for
notable level of dissent compared to 2020 However, due to the
companies with a high level of emissions, we have not
triennial nature of the policy vote, the number of resolutions
always been supportive on a company-by-company basis.
proposed was significantly lower. However, it is still clear
that executive pay is a hot topic despite nearly two decades
of focus in the UK. Higher levels of dissent were also seen in
relation to pay in France and the Netherlands.
Interestingly, an unforeseen consequence of Brexit was the
introduction of share blocking across a number of company
meetings in Ireland. This was due to the need for Irish
companies to move their central securities depositary from the
As expected, 2021 saw sustainability issues, UK back within to the EU. This change resulted in a significant
fall in the percentage of shares voted compared to market
particularly climate change, come to the fore on norms. We are now working with other investors and market
meeting agendas. participants to attempt to find a resolution to the issue.
Stewardship report – Q3 2021 contents previous continue 5
BMO Global Asset Management
Our engagement highlights
358 104 36
companies engaged milestones achieved countries covered
Engagements by issue* Milestones achieved by issue**
Climate Change
Climate Change 141 141 Climate Change
Climate Change 37 37
Environmental
Environmental Environmental
Environmental
Stewardship
Standards 43 43 Stewardship
Standards 5 5
Business Conduct
Business Conduct 11 11 Business Conduct
Business Conduct 9 9
Human Rights
Human Rights 25 25 Labour Standards
Labour Standards 21 21
Labour Standard
Labour Standard 256 256 Public Health
Public Health 6 6
Public Health
Public Health 44 44 Corporate Governance
Corporate Governance 26 26
Corporate Governance
Corporate Governance 71 71
Companies engaged
by region
North America 145 78 38 5 11
Europe
Asia (ex Japan)
Japan
Other
North America 76 194 54 20 14
Europe
Asia (ex Japan)
Japan
Other
Corporate engagement at BMO GAM
Corporate engagement is one of the key pillars of our In encouraging companies to move towards best practice
responsible investment strategy. We have over 20 years’ in the management of ESG issues, we make reference to
experience engaging in dialogue with companies on international codes and standards where relevant, such as
significant matters related to ESG issues, so as to reduce risk, the International Labour Organization Core Conventions, UN
improve performance, encourage best practice and underpin Guiding Principles on Business and Human Rights and UN
long-term social, environmental and financial value creation. Global Compact.
* Companies may have been engaged on more than one issue.
** No milestones were achieved for Human Rights.
Source: BMO Global Asset Management, as at 30-Sept-21
6 BMO Global Asset Management
Responsible Investment
Engagement and the Sustainable
Development Goals (SDGs)
We use the detailed underlying SDG targets to frame company engagement objectives, where relevant,
as well as to articulate the positive societal and environmental impacts of engagement. Engagements
are systematically captured at a target level, to enable greater accuracy and achieve higher impact.
Top 5 SDGs and targets by engagement Top 5 SDGs and targets by milestones
155 engagements 32 milestones
Target 12.6 | 134 engagements Target 13.2 | 30 milestones
Encourage companies to adopt sustainable Integrate climate change measures into national
practices and to integrate sustainability information policies, strategies and planning
into their reporting cycle
108 engagements 28 milestones
Target 5.1 | 91 engagements Target 8.8 | 13 milestones
End all forms of discrimination against women Eradicate forced labour, modern slavery and
and girls human trafficking
85 engagements 8 milestones
Target 13.1 | 52 engagements Target 16.5 | 8 milestones
Integrate climate change measures into national Substantially reduce corruption and bribery in all
policies, strategies and planning their forms
71 engagements 5 milestones
Target 8.7 | 33 engagements Target 12.6 | 2 milestones
Eradicate forced labour, modern slavery & human Encourage companies to adopt sustainable
trafficking practices and to integrate sustainability information
into their reporting cycle
32 engagements 5 milestones*
Target 3.3 | 17 engagements Target 5.5 | 5 milestones
Reduce mortality from non-communicable End all forms of discrimination against women
diseases and promote mental health and girls
* We also achieved 5 milestones on SDG 3.
This is not an exhaustive list of all engagements had and milestones achieved. Please see our SDG engagement appendix
on page 18 for a full list of targets we engaged on this quarter.
Stewardship report – Q3 2021 contents previous continue 7
Engaging for
climate action
We expect companies in climate-exposed sectors
to follow a clear trajectory of action, progressing
through basic awareness, active emissions
management, a strategic approach to climate
issues and alignment to the Paris goals.
Investor Setting best practice in
collaboration
managing physical climate risks
A range of catastrophic extreme weather events in 2021, The four key areas for action highlighted in this publication
including severe flooding in Europe and widespread are:
wildfires in North America, served as a stark reminder of our
E stablishing a climate governance framework which considers
vulnerability to the changing climate. Physical changes create
physical risks and opportunities alongside transition risk;
new and intensified risks for many companies, particularly
those with operations or supply chains in regions or countries ndertaking physical climate risk and opportunity
U
which are subject to the worst impacts. assessments;
BMO GAM joined investors representing US$10 trillion in eveloping and implementing a strategy for building climate
D
assets to contact 50 highly exposed companies in industries resilience; and
including food, consumer goods and transportation, setting
Identifying and reporting against risk, opportunity and impact
out our expectations on the management of physical climate
metrics to demonstrate progress over time
risks. This was accompanied by a new report published by the
IIGCC, ‘Building Resilience to a Changing Climate’, which sets Further details on this initiative can be found via the IIGCC
out investor views on best practice in this area. website.
8 BMO Global Asset Management
Investor
collaboration Decarbonising the steel industry
The heavy industries are now under the spotlight of investor the steel companies in the future, including investing in low
engagement on climate change, following the initial successes emission steelmaking capacity that utilises green hydrogen
we had on the energy system. In particular, steelmaking is and/or carbon capture and storage technology. On the
highly relevant to the decarbonisation agenda, due to its other hand, the strategy also calls for systematic investor
dual role of supporting the low carbon transition and being engagement on the steel value chain, for example to
an emissions-intensive sector. The uncertainty of low carbon engage downstream customers on “green” steel purchasing,
technology development and the high capital cost to deploy to accelerate technological advancement.
them are two pertaining issues often mentioned by companies
in the industry.
Recognising these challenges, the IIGCC gathered a group of
investors, including BMO GAM, to develop a net zero steel The IIGCC gathered a group of investors,
strategy. In a dedicated publication, Global Sector Strategies:
Investor interventions to accelerate net zero steel, the investor including BMO GAM, to develop a net
group highlighted several key measures that should be taken by zero steel strategy.
Stewardship report – Q3 2021 contents previous continue 9
Ongoing
engagement
focus
Engaging on net zero
In the run-up to COP26, we are continuing to focus our companies to take on a ‘net zero’ ambition is
climate change engagement on the objective of achieving important, this alone has little value without a robust
net zero global greenhouse gas emissions by 2050, in line implementation strategy. A key framework here is the
with the goal of limiting the average temperature rise to Climate Action 100+ Net Zero Company Benchmark,
1.5°C – as well as our own commitment to net zero, as part which sets out best practice expectations – including
of the Net Zero Asset Managers Initiative. setting net zero-aligned short and medium-term
targets; implementation of strategy; and governance
We expect that the analysis of net zero alignment will
oversight of climate actions.
support the deeper integration of climate risks and
opportunities into investment portfolios, through the use Finally, efforts to address data gaps, including
of new data sets and analytical techniques. The emphasis through our participation in the Carbon Disclosure
on engagement coming out of the methodologies so far Project’s annual Non-Disclosure Campaign, should
developed will add further impetus to investor stewardship, support better company disclosure, also building on
particularly beyond the Climate Action 100+ companies progress made by the Task Force on Climate-related
already under intensive focus. Whilst encouraging Financial Disclosures.
10 BMO Global Asset Management“Our collective responsibility is to
ensure that a better future is not
only possible but probable, and then
not only probable but foreseeable.”
Christiana Figueres and Tom Rivett-Carnac,
The Future we Choose: Surviving the
Climate Crisis, 2020
Industry China’s oil majors join forces to
collaboration
tackle methane emissions
Methane emissions are the second-largest cause of global in the industry, including China Resources Gas, as its
warming today. These emissions, which have a significant founding members. We had previously engaged the four
warming potential, come from a range of anthropogenic companies to encourage they step up their efforts to
and natural sources, including from the energy sector – identify, measure and manage methane emissions from
mainly from oil, natural gas, coal and biofuel combustion. their operations.
Emissions remain high as implementing abatement options
The Alliance will help support China's efforts to meet its
quickly and at scale remains a challenge. While methane
2060 carbon neutral target. By focusing on promoting
tends to receive less attention than carbon dioxide, reducing
technology development and industry cross-learning,
methane emissions will be critical to avoid the worst effects
the Alliance can help bolster research and the adoption
of climate change.
of stronger methane emissions detection, control and
In this context, we welcome the China Oil and Gas reporting practices by key industry players. We will
Enterprises Methane Emissions Control Alliance, jointly closely monitor progress and continue engaging with its
initiated by oil & gas exploration and production majors members and others to drive implementation of better
PetroChina, Sinopec and CNOOC, with four other companies methane emissions reduction practices.
Stewardship report – Q3 2021 contents previous continue 11Priority
company Reliance Industries
update – A giant shifting gears
India’s largest company and one of the world’s largest oil International Climate Summit 2021 this past June. He also noted
refiners and petrochemicals manufacturer Reliance Industries significant progress in the construction of a giga-complex in
has embarked on an immensely ambitious transformation. The Jamnagar, India, which is set to be one of the world’s largest
company has set out to expand its retail, telecommunications green energy facilities. These announcements make us confident
and technology businesses, while investing heavily in clean that the company is on track to meet its 2035 net zero goal. We
energy. The latter includes plans to invest up to $10 billion over will continue our active engagement with Reliance, which we
the next three years to build giga-factories to manufacture/ are pursuing both individually as well as collaboratively through
integrate renewable energy, develop green energy chain value Climate Action 100+, to encourage the company improve overall
chain and partnerships and re-purpose existing capabilities to climate-related governance, management and disclosures.
deliver renewable energy solutions.
We would like to highlight the company’s recent Reliance Industries' recent announcements
announcement of its ambition to help make green hydrogen
the most affordable fuel option in India. Mukesh Ambani, make us confident that the company is on
the Chairman and CEO, delivered the news himself at the track to meet its 2035 net zero goal.
12 BMO Global Asset ManagementCompany case study: China Resources Gas (CRG)
Sector: Energy Theme: Climate change Issue: Emissions management
Response to engagement: Poor SDG: 13 Target: 13.2
Background
Verdict
As the largest natural gas distributor in China, CRG is a key player
in the government’s drive to decarbonise the coal-dominant
energy sector. While there are questions around natural gas as
a transition fuel, China’s policy framework will likely become While the company has
more supportive for gas in power, as the government looks not answered our calls for
to meet its goal of peaking emissions by 2030 and achieving engagement, we have seen
carbon neutrality by 2060, and the rising needs of power changes in the past year that
system flexibility driven by renewables integration. We have are in line with our requests.
had concerns over the company’s limited approach to managing The launch of the China Oil and
greenhouse gas (GHG) emissions – particularly methane, which Gas Methane Alliance, to which CRG is a founding
can escape from cracks on gas pipelines and constitute a member, signals an appetite to incorporate
significant contributor to climate change. methane emissions controls into GHG emissions
reduction plans. Importantly, the company has
Action committed to set environmental KPIs, including
an emissions reduction target. We will continue
We have tried to engage the company on climate change
to write to CRG with further recommendations,
management for two years. Although CRG has not responded,
including setting a more robust climate
we consistently share views and recommendations on our
governance framework, making sure GHG targets
expectations regarding effective GHG emissions management.
are based on science, and reporting in line with
We have encouraged the company to take more decisive action
TCFD recommendations.
to improve its capacity to identify, measure and reduce methane
emissions across its pipeline and storage network. We also called
for greater transparency of methane leakage figures, as well as
Juan Salazar
detection and remedial efforts, and for collaboration with peers
Director, Responsible Investment
to address this issue at an industry level. Finally, we have asked
CRG to set and disclose a GHG emissions reduction target aligned
with China’s peak emissions and carbon neutrality pledges.
Stewardship report – Q3 2021 contents previous continue 13BMO Global Asset Management
Engagement
on the environment
To secure a sustainable future, we must take better care of our planet. We
engage companies on environmental issues, including climate change,
deforestation and plastic pollution – learn more.
Global action to tackle the biodiversity crisis on plastic pollution at the upcoming fifth Session of the United
Nations Environmental Assembly (UNEA5).
Public policy
The 15th Conference of the Parties to the Convention on
Biological Diversity (COP15) has been partly delayed due to the
BMO GAM recognises investors’ role in stopping the severe
Covid-19 pandemic, with an online event happening in October
threat of plastic pollution to biodiversity, public health,
2021 and in-person negotiations in 2022. The conference is
and marine life. Through our corporate engagement in the
expected to deliver a post-2020 global biodiversity framework
environmental stewardship theme, we see the challenges
companies face when trying to close the loop by recovering
with national targets and action plans. Q
plastics from the value chain post-consumer use. The lack of Recognising the importance of a positive outcome of the
a coherent global strategy to address plastic pollution means conference, we joined a group of 77 financial institutions
that even as the leading companies work to ensure that their managing more than $10trn in assets to call for an ambitious
products are recyclable and incorporate recycled materials, global framework, including the alignment of financial flows
progress is not being made fast enough. To urge governments with global biodiversity goals and strengthening national
to help drive the transition to a circular economy, we joined strategies to deliver on the targets. It is the strongest-ever
corporates and investors to urge negotiations of a UN treaty call by financial institutions for governments to address the
biodiversity crisis, making a case for the economy benefits of
creating a nature-based economy.
Specifically, the statement calls on governments to:
gree on an ambitious and transformational post-2020 Global
A
Biodiversity Framework (GBF) that requires the alignment of
financial flows with global biodiversity goals
Strong policies, in line with the Global
S trengthen national biodiversity strategy and action plans
Biodiversity Framework, can accelerate and (NBSAPs) to ensure successful implementation of the GBF
scale up private capital flows towards a net-zero and enforce domestic policies to deliver biodiversity targets
and nature-positive economy. We encourage E stablish a regulatory environment that enables financial
governments to engage closely with financial institutions to address biodiversity-related risks and
opportunities, including by introducing consistent and
institutions to make sure these opportunities decision-useful corporate disclosure requirements
are fully realized.
emove harmful subsidies and reverse them into aligned
R
Financial Institution Statement ahead of the subsidies to bring about economic change and reduce
Convention on Biological Diversity COP15 market failures
1
Financial Institutions back UN Treaty on plastic pollution, https://wwf.panda.org/wwf_news/press_releases/?3496466/Financial-Institutions-back-UN-Treaty-on-
plastic-pollution
14 BMO Global Asset ManagementProtecting life on Earth: addressing biodiversity loss
Biodiversity is the variety of life on Earth – it is nature in all
its forms and interactions, from genes, to species, to entire
ecosystems. It is essential for human life: the air we breathe,
the water we drink and the food we eat all rely on it. It is also
Gathering momentum in
fundamental to our global economy: roughly half of the world’s the investment industry
GDP is highly or moderately dependent on biodiversity. But
humanity is destructing biodiversity at a scale that’s pushing Addressing biodiversity loss must urgently rise
nature to the verge of breakdown. up investment agendas. But there are gaps in
investors’ understanding is hindering related
investment in nature-positive outcomes. This
Q What’s driving biodiversity loss? is something the Taskforce on Nature-related
Disclosures (TFND) is aiming to achieve, by
Biodiversity loss began to ramp up during the 18th century delivering a risk management and disclosure
industrial revolution, but over the past 50 years it’s become framework to support organisations in their
unsustainable. The expansion of global trade, increasing levels of actions and reporting on nature-related risks.
consumption, human population growth and rapid urbanisation
There are also huge investment opportunities
are considered indirect drivers of biodiversity loss – huge shifts
available: transitioning to a nature-positive
in human values and behaviours that cause the direct drivers of
economy could generate up to US$10.1
biodiversity loss, such as changes to the way we use the land and
trillion and create just shy of 400 million
sea, exploitation of natural habits, climate change and pollution.
jobs by 2030. There has already been an
explosion of creative tech solutions, from
Why is protecting biodiversity so tree-planting drones to satellites monitoring
Q important? animal species. Meanwhile, regenerative
agriculture practices are improving soils,
Biodiversity loss is an interconnected issue that threatens the protecting the environment and enhancing
achievement of the SDGs. We can’t combat climate change if ecosystem services. Our role as investors is to
we keep destroying our forests and coral reefs, which help to identify the companies leading the charge for
regulate our planet’s temperature; we can’t eradicate hunger if investment opportunities, and engage with
food becomes more scarce; and we can say goodbye to reducing any laggards.
inequalities because loss of biodiversity especially hurts the
poorest people who depend on it.
Stewardship report – Q3 2021 contents previous continue 15BMO Global Asset Management
Engagement
on social issues
Historically difficult for investors to define and quantify, social issues are now
among the most pressing issues for companies globally – discover our recent
engagement here.
New agreement to protect garment workers in
Bangladesh
Multi-stakeholder collaboration
The Rana Plaza disaster
In August 2021, international brands, unions and the
Bangladeshi garment industry came together to enact the
On 24 April 2013, the Rana Plaza
International Accord for Health and Safety in the Textile
and Garment Industry (International Accord). In the run up building in Dhaka, Bangladesh,
to the signing of this initiative, we wrote to 19 companies which housed five garment factories,
that were signatories to the original Bangladesh Accord on
Fire and Building Safety that was launched in 2013 right collapsed and killed at least 1,132
after the Rana Plaza factory collapse. We asked companies people and injured more than 2,500.
that they reaffirm their commitment to the Accord model.
We are encouraged by the fact that 12 of the companies that Just five months earlier, a fire in the Tazreen
we spoke to, including Primark, ASOS, Hugo Boss, Adidas Fashions factory on the outskirts of Dhaka killed at
and Puma, have reaffirmed their commitment to worker least 112 workers.
safety in Bangladesh by signing the International Accord. The
These disasters are among the worst industrial
new agreement commits to focus on the health and safety
accidents on record and raised concerns globally
programme in Bangladesh, and to build a credible industry-
about poor labour conditions endured by workers
wide compliance and accountability mechanism. It also
in Bangladesh’s ready-made garment sector.
intends to extend the International Accord model to other
Millions of girls and women, earning some of
regions, streamline the arbitration process that enforces the
the lowest wages in the world, are exposed to
Accord’s terms, and expand the scope of the agreement to
dangerous working environments that result in
address human rights due diligence.
high levels of accidents, deaths and diseases.
We will continue to encourage our investee companies
sourcing from Bangladesh and other covered regions to sign
on to the International Accord. Where this is not the case, we
would expect companies to have their own mechanisms for
risk mitigation relating to the structural integrity of factories
they source from.
We will continue to encourage our investee companies sourcing from Bangladesh and other
covered regions to sign on to the International Accord.
16 BMO Global Asset ManagementCompany case study: Eli Lilly
Sector: Pharmaceuticals Theme: Public health Issue: Access to Healthcare
Response to engagement: Good SDG: 3 Target: 3.8
Background
Eli Lilly is one of the world’s largest pharmaceutical companies. Verdict
In recent years we became increasingly concerned about the
company’s approach to and disclosure on access to medicine.
Following the publication of the Access to Medicine Foundation’s
2018 Access to Medicine Index (ATMI), in which Eli Lilly ranked The appointment of a Head
last, we ramped up our engagement with the company. of ESG Strategy has resulted
in positive change at Eli
Action Lilly in terms of access to
medicine. The company has
In November 2020, we participated in a collaborative call with
already improved its reporting
other investors about access to medicine (among other issues)
on not only access to medicine but also other
and were positively surprised by the participation of the newly
material ESG issues, and we hope this increased
appointed Head of ESG Strategy at Eli Lilly. We discussed the
willingness to be transparent will translate into
company’s approach to expanding access to insulin against the
an enhanced reputation and a higher ranking
backdrop of the pandemic, including the introduction of the
in the next ATMI. Moreover, Eli Lilly can more
Lilly Insulin Value Program in April 2020, enabling people in the
clearly demonstrate its alignment with SDG 3 –
US – regardless of their insurance status – to fill their monthly
Good health and well-being – by continuing to
prescription of insulin for only $35, and we encouraged the
strengthen its access to medicine initiatives.
company to disclose metrics to facilitate analysis of its access to
medicine initiatives. We then had a one-to-one meeting with the
Head of ESG Strategy. We commended the company’s efforts to
address insulin access and affordability, but expressed concerns
about its poor performance in the ATMI, and highlighted the
reputational risks of failing to be transparent about access to
Catherine McCabe
medicine initiatives. In our most recent meeting, we were
Senior Associate, Responsible Investment
informed that Eli Lilly is seriously considering participating in the
data collection process for the next ATMI, which would help to
bolster its credibility.
Stewardship report – Q3 2021 contents previous continue 17BMO Global Asset Management
Access our insights ESG Viewpoint
Five challenges for
net zero investing
Vicki Bakhshi Group for the Net Zero Investment Framework. We have also
been discussing our progress with clients, as the net zero
journey needs to be a partnership between asset owners
Director, Climate Strategist, and managers.
Responsible Investment
Through our own work and our collaboration, we have
identified five of the challenges faced by us and other
investors:
Selecting a methodology
As highlighted in the Welcome note of this report, the IPCC There is no single ‘net zero investing’ methodology.
delivered a very stark warning on climate change earlier this Several approaches have been developed by
year, while at the same time deadly flooding and wildfires different groups. In our view, this is a healthy
presented some of the extreme physical impacts of climate reflection of innovative activity on an issue that has emerged
change sooner than many scientists had predicted. incredibly rapidly, almost from a standing start barely a year
ago – but it does create the potential for confusion.
In the run-up to the rescheduled COP26 climate negotiations,
we have seen momentum gather behind the ambition of
‘net zero’ greenhouse gas emissions by 2050, consistent Avoiding perverse incentives
with a 1.5 degree trajectory. The investment community has
joined the push, with $43trn committed by asset managers A concern with emissions targets of any kind is
and $8.5trn by asset owners. At BMO GAM, we’ve been that they can encourage decisions that are aimed
working on how to fulfil our commitment. We’ve also been just at meeting the target, rather than achieving
contributing to industry knowledge on net zero investing, real-world emissions reductions. This risk exists both for
particularly through co-chairing the Implementation Working companies and for investors.
Being open about the challenges and limitations of the methodologies we use is essential in
terms of communicating honestly with clients and other stakeholders, as well as identifying
the areas where further work is needed.
18 BMO Global Asset ManagementDealing with data gaps they are significantly less mature for others, such as sovereign
debt, private equity, and multi-manager funds.
The use of forward-looking, company-specific data
points helps provide a more meaningful analysis Whilst the road to net zero may seem daunting for investors,
of net zero alignment in terms of addressing the work being done by individual investors and through
the challenge above…but the approach carries significant collaboration is rapidly making progress. Being open about
challenges in terms of patchy data. the challenges and limitations of the methodologies we use
is essential in terms of communicating honestly with clients
and other stakeholders, as well as identifying the areas where
Account for solutions providers further work is needed.
Many companies involved in the manufacture We see many opportunities arising from the rapid growth
of emissions-savings technologies may have in investor commitment. The analysis of net zero alignment
a significant carbon footprint of their own, as will support the deeper integration of climate risks and
compared with some other sectors – but looking just at these opportunities into investment portfolios, through the use
direct emissions does not capture the emissions savings they of new data sets and analytical techniques. The emphasis
create though their products. on engagement coming out of the methodologies so far
developed will add further impetus to investor stewardship,
particularly beyond the Climate Action 100+ companies already
Expanding to all asset classes under intensive focus. And efforts to address data gaps should
support better company disclosure, building on progress made
The commitments made by investors, including
by the Task Force on Climate-related Financial Disclosures.
BMO GAM, under the Net Zero Asset Managers
Initiative mean transitioning all our assets under Implementing net zero is a huge challenge. But it’s also an
management to net zero emissions by 2050. However, whilst exciting new journey for all of us. Being frank about the
methodologies are becoming increasingly available for some difficulties we encounter will add to credibility and consistency
asset classes, notably equities, credit and direct real estate, across the industry. It’s critical we get this right, and fast.
Interested in learning more about the challenges we’ve identified and the solutions
we see? Download the full viewpoint to discover more.
Download ESG Viewpoint
Stewardship report – Q3 2021 contents previous continue 19BMO Global Asset Management
Pioneers in
responsible investment
At BMO GAM, responsible investing is at our core – from the launch of Europe’s first ethically
screened fund in 1984 and our position as a founding signatory of the UN PRI, to the comprehensive
suite of ESG specialist funds and services available today.
A leading voice on a vital conversation Co-heads
35+ years
of investing responsibly
Alice Evans
Managing Director, Co-Head
20+ years of Responsible Investment
of driving positive change through ESG engagement
A+ Rated Claudia Wearmouth
for strategy and governance, and ESG incorporation and active ownership in listed
equities by UN Principles for Responsible Investment Managing Director, Co-Head
of Responsible Investment
Recent awards
Best Sustainable & Best Sustainable & ESG
ESG Equity Fund Research Team
Past performance is not a guide to future performance. All information as at 31 Dec 2020
20 BMO Global Asset ManagementResponsible Investment
Investing responsibly is at our core
Our experienced Responsible Investment capability is structured to cover:
Responsible investing skills such as ESG analysis, engagement, screening and proxy voting
Responsible investing themes across E, S and G
Industry sector knowledge
Equity
How we drive positive change
Alte
rnativ co me
es Fixed In
Multi-Asset Solutions
We use our experience, expertise
and influence to have a positive
impact on investments and the
wider world, sharing actionable
insights with our clients.
We use our sector knowledge,
ESG data and recognised influence
to engage thoughtfully with the
companies that we, or our clients,
are invested in to bring about
positive change.
We ensure that all relevant
ESG factors are considered in our
investment analysis to provide a
more comprehensive and rounded
risk perspective.
We offer a comprehensive
suite of responsible products
and solutions that are constantly
evolving to meet the needs of our
investors and our world.
Stewardship report – Q3 2021 contents previous continue 21BMO Global Asset Management
SDG engagement appendix
Discover the full list of SDG targets that we engaged on during Q3 2021:
1.1 Eradicate poverty and ensure a living wage for all; 2.1 End hunger and ensure access to safe
and nutritious food; 3.1 reduce the global maternal mortality ratio; 3.3 End the epidemics of AIDS,
tuberculosis, malaria and neglected tropical diseases and combat hepatitis, water-borne diseases and
other communicable diseases; 3.8 Achieve universal health coverage, including financial risk protection,
access to quality essential health-care services and access to safe, effective, quality and affordable
essential medicines and vaccines for all; 5.1 End all forms of discrimination against women and girls;
5.2 Eliminate all forms of violence against all women and girls in the public and private spheres;
5.5 Ensure full equality of opportunity for women, including at leadership levels; 6.3 Improve water
quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and
materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe
reuse globally; 7.1 Ensure universal access to affordable, reliable and modern energy services;
7.2 Increase substantially the share of renewable energy in the global energy mix; 7.3 Double the global
rate of improvement in energy efficiency; 8.2 Achieve greater productivity through innovation;
8.5 Achieve full and productive employment for all; 8.6 Substantially reduce the proportion of youth
not in employment, education or training; 8.7 Eradicate forced labour, modern slavery & human
trafficking; 8.8 Protect and promote safe working environments for all workers; 10.2 Empower and
promote inclusivity for all; 10.4 Adopt policies, especially fiscal, wage and social protection policies, and
progressively achieve greater equality; 10.7 Facilitate orderly, safe, regular and responsible migration and
mobility of people; 11.1 Ensure access for all to adequate, safe and affordable housing and basic services
and upgrade slums; 11.5 Significantly reduce the number of deaths and the number of people affected
and substantially decrease the direct economic losses relative to global gross domestic product caused
by disasters; 11.6 Reduce the adverse per capita environmental impact of cities; 12.2 Sustainably manage
and make efficient use of natural resources; 12.4 Manage chemical usage and waste throughout their life
cycle; 12.5 Reduce waste through prevention, reduction, recycling and reuse; 12.6 Encourage companies
to adopt sustainable practices and enhance ESG reporting; 12.c Rationalize inefficient fossil-fuel subsidies
that encourage wasteful consumption; 13.1 Strengthen resilience and adaptive capacity to climate-related
hazards and natural disasters in all countries; 13.2 Integrate climate change measures into national
policies, strategies and planning; 13.a Address climate change mitigation for developing countries;
15.1 By 2020, ensure the conservation, restoration and sustainable use of terrestrial and inland
freshwater ecosystems; 15.2 Promote the implementation of sustainable management of forests;
15.5 Take urgent and significant action to reduce the degradation of natural habitats, halt the loss of
biodiversity and protect and prevent the extinction of threatened species; 15.a Mobilize and significantly
increase financial resources from all sources to conserve and sustainably use biodiversity and
ecosystems; 15.b Mobilize significant resources to finance sustainable forest management and provide
adequate incentives to developing countries to advance such management; 16.b Promote and enforce
non-discriminatory laws and policies for sustainable development.
Interested in learning more about the SDGs and targets?
Find out more
22ESG is a mindset,
not an asset class
bmogam.com/responsibleinvesting
contents previous continue 23Contact us
Institutional business:
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bmogam.com/adviser
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Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation
or solicitation to buy or sell any companies that may be mentioned.
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