Five key takeaways from our 2023 Responsible Investment Annual Report

June 6, 2024

1. Amplifying engagement across Canada and abroad

We participated in 1,698 engagements in 2023, across Canada as well as global markets.

 

This encompasses engagement conducted by BMO GAM’s responsible investment team and Responsible Engagement Overlay (reo®), a third-party pooled engagement service provider retained by BMO GAM with global reach. Together, we are amplifying our impact on behalf of our clients.

1,698

engagement activities

1,034

companies engaged

249
milestones achieved1

Engagements

Environmental, Social and Governance Engagements 2023
The chart showing diversification across engagement types

2. Making our vote count toward real world change

We strive to be as transparent as possible, which is why public details of all our voting activity, including the rationale for votes against management, are available on our Mutual Funds Proxy Voting Dashboard and our Exchange Traded Funds (ETFs) Proxy Voting Dashboard.

66,548
items voted
transfer icon
18%

of items voted against management

6,527

company meetings voted

51%

of shareholder proposals supported

Proxy voting case studies

3. Making strides in climate action

BMO GAM considers the evaluation of climate risks to be an essential component of investor due diligence and our responsible investing strategy. This commitment is manifested through our Climate Action Approach.

Growing plant
759
climate action-focused engagements
482
companies engaged on climate action
100
climate action-related milestones achieved

As a founding signatory of the Net Zero Asset Managers (NZAM) initiative, we are working toward achieving net-zero emissions across all our assets under management by 2050.

 

In 2023, we were proud to launch the BMO Global Climate Transition Fund. The fund invests primarily in equity securities of companies from around the world that may focus on the global low-carbon transition. This global shift will require substantial transition capital and presents a significant investment opportunity.

Climate Change Partner Award

BMO GAM was proud to be the recipient of Institutional Connect’s 2023 Climate Change Partner Award

This award recognized our responsible investment team’s innovation and progress in our approach to addressing climate change in the firm’s investment management process, stewardship strategy and through market education initiatives and product development. Read more about the award criteria and methodology here.

4. Advancing social equality

Our Social Equality Approach outlines how we view growing social inequality as a systemic risk that will jeopardize long-term value creation.

Team icon
678
social equality-focused engagements
456
companies engaged on social equality

117

social equality-related milestones achieved

This past year, BMO GAM was very active in the UN PRI’s Advance initiative to promote the adoption of the UN Guiding Principles (UNGPs), responsible political engagement and decent work.  As co-leads for three collaboration groups, we worked with other major Canadian, U.S. and European investors to set strategic direction and identify priority focus areas for engaging various mining companies.

 

One of our market education initiatives in 2023 was to provide investors and investee companies with guidance on respecting human rights. In our Deep Dive research report Respect and Protect: The State of Corporate Human Rights Due Diligence in Canada, we shared the results of our primary benchmarking research on the adoption of UNGPs-aligned human rights due diligence (HRDD) practices by Canada’s largest public issuers across six sectors.

In response to the Global Reporting Initiative’s call for input on its newly developed disclosure standard for the metals and mining sector, we provided our perspective on the need for disclosure of employment practices at the mine site level. In addition, we provided feedback on the ISSB’s Statement of Priorities and submitted a survey response to the UN Working Group for Business and Human Rights’ call for input on Investors, ESG and Human Rights.

5. Taking ESG integration to the next level

In 2023, BMO GAM’s responsible investment team launched a new ESG dashboard, a proprietary dynamic materiality map and other custom ESG tools to allow our investment teams to cut through the noise of thousands of ESG datapoints to find meaningful insights. In addition, our Head of ESG Integration began hosting quarterly webinars about various ESG risks to further educate our investment teams.

Here’s what BMO GAM’s investment teams were up to in 2023

Our investment teams consider material ESG and other factors in their decision-making for relevant mandates, supported by our RI team’s research, data curation and tools. Click on the tabs below to see specific examples of our diverse methods at work.

Active Fixed Income

The team purchased Hydro One 10-year and 30-year sustainability-linked bonds as new issues in 2023. Hydro One is the first utility in Canada to publish a sustainable financing framework. Its inaugural issue was for a combined $1.05 billion, the largest aggregate amount ever issued by sustainability-linked bonds by a Canadian corporation. The use of proceeds is planned to include clean energy and transportation, socioeconomic advancement of Indigenous peoples and access to essential services.

Fundamental Equity

Holding profile: Cameco is one of the world’s largest producers of uranium. It also owns 49% of Westinghouse, a nuclear power services provider to approximately 50% of the global reactor fleet. Nuclear energy provides baseload power with no carbon emissions. As the global nuclear industry experiences a rebirth amid the global energy transition, the combination of Cameco’s uranium production and Westinghouse’s services create a full-service nuclear company that is poised to benefit from increased investments in the sector over time.

Growing plant

Quantitative Investments

The team added Dream Industrial REIT, Canada’s largest landlord and property manager for logistic warehouses and distribution centres after the Quantitative Investments team and the RI team performed a joint due diligence review. The teams observed that Dream Industrial actively pursued energy efficiency projects and green leases to reduce environmental impact. Our teams’ joint efforts resulted in a decision to increase our allocation of Dream Industrial.

Multi-Asset Solutions (MAST)

Holding profile: For strategies and managed portfolios like the BMO Sustainable Portfolios, MAST has an innate bias toward quality companies that score well on ESG metrics. This means that the BMO MSCI USA Leaders Index ETF (ESGY) will always be an integral building block. Through ESGY, MAST has sizable allocations to the high-quality companies that are heavily invested in the AI revolution, which overlaps well with the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla).

Global Equity

Holding profile: Iberdrola is one of the largest electricity utility groups in the world, serving approximately 100 million people, mainly in Europe, Latin America and the U.S. close to 80% of its generational capacity being emission-free, the company is one of the world’s largest offshore wind developers and operators, and a pioneer in utility-scale hydrogen. With nearly 90% of its generation in Europe coming from zero-emission sources, the team believes its integrated strategy supports future growth estimates as a leader in the development and operation of renewable energy projects.

Exchange-traded Funds (ETFs)

Holding profile: BMO Balanced ESG ETF (ZESG)’s unique mandate uses ESG equity and sustainable bond indices to create a core balanced portfolio that minimizes exposure to controversial business practices while maintaining benchmark-like risk and return metrics. Explicit exclusions used by the selected index frameworks eliminate companies whose operations could imperil capital, and the weighting methodology ensures investors have broad sector and country exposures, similar to broad beta indices.

Sources

Footnotes

1 A milestone is considered when a company makes tangible improvements in its policies and practices that align with our voting and engagement activities.

Disclaimers

This report is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Particular investments and/or trading strategies should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance.

 

Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent prospectus.

 

The viewpoints expressed by the Portfolio Manager represents their assessment of the markets at the time of publication. Those views are subject to change without notice at any time without any kind of notice. The information provided herein does not constitute a solicitation of an offer to buy, or an offer to sell securities nor should the information be relied upon as investment advice. Past performance is no guarantee of future results. This communication is intended for informational purposes only.

 

The portfolio holdings are subject to change without notice and only represent a small percentage of portfolio holdings. They are not recommendations to buy or sell any particular security.

 

The ETF referred to herein is not sponsored, endorsed, or promoted by MSCI or Bloomberg and they each bear no liability with respect to any such ETF or any index on which such ETF is based. The ETF’s prospectus contains a more detailed description of the limited relationship MSCI or Bloomberg have with the Manager and any related ETF. Commissions, management fees and expenses (if applicable) may be associated with investments in mutual funds and exchange traded funds (ETFs). Trailing commissions may be associated with investments in mutual funds. Please read the fund facts, ETF Facts or prospectus of the relevant mutual fund or ETF before investing. Mutual funds and ETFs are not guaranteed, their values change frequently and past performance may not be repeated.

 

For a summary of the risks of an investment in BMO Mutual Funds or BMO ETFs, please see the specific risks set out in the prospectus of the relevant mutual fund or ETF. BMO ETFs trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.

 

BMO Mutual Funds are managed by BMO Investments Inc., an investment fund manager and a separate legal entity from Bank of Montreal. BMO ETFs are managed by BMO Asset Management Inc., an investment fund manager and a portfolio manager and a separate legal entity from Bank of Montreal.

 

BMO Global Asset Management is a brand name under which BMO Asset Management Inc. and BMO Investments Inc. operate. Certain of the products and services offered under the brand name, BMO Global Asset Management, are designed specifically for various categories of investors in Canada and may not be available to all investors. Products and services are only offered to investors in Canada in accordance with applicable laws and regulatory requirements.®/™ Registered trademarks/trademark of Bank of Montreal, used under licence.

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