Industry Voice: Investor engagement comes of age. BMO Global Asset Management committed to making finance a force for good

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Industry Voice: Investor engagement comes of age. BMO Global Asset Management committed to making finance a force for good

This year, BMO Global Asset Management is celebrating 20 years of investor engagement on environmental, social and governance issues. The decade ahead is vital for securing a sustainable future - join us on the journey. 

 

This year we are celebrating 20 years of investor engagement.  The past two decades have seen us engage more than 5,500 companies on the most relevant and impactful ESG issues for their businesses, and we have recorded over 3,700 instances of positive change - ‘milestones' - in the same time period.

The way investors conduct engagement has transformed. Ethically minded investors used their power as shareholders as a tool to pressure companies as far back as the 1970s, when a shareholder resolution was filed at Dow Chemical seeking to restrict their sale of napalm. At the time a rare approach, by the 1970s-1980s the shareholder resolutions had become more commonplace, with a number of anti-apartheid resolutions being filed at companies with links to South Africa, aimed at intensifying pressure alongside a divestment campaign.

A significant obstacle to scaling up these efforts was a lack of common definitions and standards for sustainability. This changed in the late 1980s, with the United Nations leading the way in founding some of the key institutions and concepts that have guided action on sustainability ever since. The launch of the United Nations Principles for Responsible Investment in 2006 was a pivotal moment in beginning to build momentum around investor engagement, and it has grown ever since. Today, engagement is a mainstream investor activity; the success of the Climate Action 100+ initiative in bringing together investors representing close to US$40 trillion in assets shows how far we have come.

Active ownership has proven its worth as a valuable and legitimate financial tool. At BMO, we view engagement not only as a tool to identify and manage risks, but also as a route to create positive impact for the environment and society. We believe good engagement encompasses five important factors:

  • Strategic: Integrating ESG issues into business strategy
  • Comprehensive: Engaging companies across asset classes and geographies
  • Impactful: Delivering positive outcomes
  • Bold: Backing up engagement with clear escalation strategies and a willingness to use voting power
  • Collaborative: Working with other investors and wider stakeholders

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). We use the SDGs as a framework for our engagement, and are increasingly collaborating with other investors and policymakers to set strong sustainability frameworks.

A fundamental shift in perspective that we are already starting to see, and expect to accelerate in the coming decade, is from viewing stewardship as about the relationship between investors and individual companies towards looking more holistically at our responsibilities for shaping the market and economy as a whole. Climate change is perhaps the most obvious example of a systemic risk which investors can help to address, but it is not the only one. Critical issues such as ocean health, biodiversity and public health cannot be addressed by engagement with companies alone.

Implementing this practice means a sharper focus than in the past on public policy, but also widening our perspective to build relationships with other stakeholders including NGOs and academic experts. A collaborative approach between investors is key to making this a success, both to muster the resources necessary to make these changes and to present a unified voice which improves the chances of successful influence.

We will also be pressing for a more systematic approach to the management and disclosure of social issues, particularly as the COVID-19 pandemic highlights their critical importance both to companies and to society.

Our corporate purpose is to Boldly Grow the Good in business and life. Through our commitment to responsible investing, we believe we are putting this purpose into action, playing our part in the movement towards making finance a force for good.

The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested. 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 stocks or products that may be mentioned.

© 2020 BMO Global Asset Management. Financial promotions are issued for marketing and information purposes; in the United Kingdom by BMO Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority.

 

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