CA-EN Institutional
CA-EN Institutional

Responsible investing stewardship report – Q3 2020

November 2020
November 2020

At BMO we invest with a purpose – to boldly grow the good. As asset managers, we have a privileged and trusted position as stewards of capital, which gives us both influence and responsibility. We take this responsibility seriously, working closely with the companies we invest in as active owners to improve the management of environmental, social and governance (ESG) issues through engagement. Ultimately, 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 by supporting the achievement of the United Nations Sustainable Development Goals (SDGs).

We support this work with the thoughtful exercise of our voting rights. This is a key part to our stewardship responsibilities, and an opportunity to influence change. We regularly engage companies before and after voting to explain our expectations and invite comment, and to explain our reasons for any votes against management.

We believe that stewardship delivers the best outcomes when it focuses on the right issues for the right company at the right time. Use this report to discover our engagement and voting highlights over the quarter, as well as key company case studies that illustrate our varied approach to engagement.

Engagement and voting in review

In stark contrast to the regulatory endorsement of responsible investment practices across Europe, the current US administration continues to seek to unwind decades of progress made. After proposing a rule at the end of last quarter to restrict Employee Retirement Income Security Act (ERISA) plans offering sustainable investments to retirement savers, the US Department of Labor (DoL) issued another proposal this quarter. It is now seeking to impose additional (unnecessary in our view) hurdles to proxy voting that could impair the ability of ERISA pension funds to exercise their shareholder rights. We are concerned about this latest proposal as it might weaken portfolio oversight and ultimately be detrimental for pension plan participants. We have joined calls by US and international institutional investors for the DoL to change course by withdrawing or significantly amending the proposals.

This quarter, we also led or added our voice to investor demands and groups pushing for better corporate practices in areas such as carbon emissions management, diversity and inclusion, public health and animal welfare.

US regulatory pushback on responsible investment gains pace – Regulatory developments

In response to an Executive Order signed by Donald Trump last year that provided additional support for the US fossil fuels industry, the U.S. Department of Labour (DOL) opened a comment period on two separate rules that impact private pension plans regulated under the ERISA. The first of these rules blocked the inclusion of any investment fund that partakes in “ESG investing” as a default option to beneficiaries as part of their ERISA plan. In our response to the consultation we pointed out that ESG integration is integral to prudent investment analysis, meaning that the rule risked limiting the ability for plan fiduciaries to grow assets and manage risk effectively over the long-term. The second rule addressed concerns over how ERISA plans vote their proxies, particularly in relation to environmental and social shareholder proposals. The DOL proposed the creation of a new economic analysis requirement, whereby before an ERISA plan can vote any proxy at company shareholder meetings it must undertake an analysis if the particular vote will economically impact the specific plan or if its holding is material enough to impact the eventual vote outcome. In our response to the DOL, we argued that this proposal significantly undervalues the benefits of proxy voting by effectively encouraging ERISA plans not to vote, as well as the impractical and costly nature of implementing the new rules.

Also this quarter, the SEC published its final conclusions on two key pieces of rulemaking following a period of comment earlier in the year. The first of these involves the federal regulation of proxy advisors. The final rule dropped the requirement for issuers to review research prior to publication; however, this was replaced by a new provision to allow review concurrently with it being published to clients, alongside requirements for investors to demonstrate that they will review any post-publication rebuttals issued by companies. This has shifted some of the burden from proxy advisers to investors themselves. The proxy adviser ISS has continuing litigation over this proposal, which could see it overruled. Under the second set of proposed regulations, the SEC intends to revise the terms by which investors can file shareholder proposals by increasing share ownership and re-submission thresholds and introducing mandatory obligations for filers to engage companies on the proposal. Except for removing a problematic ‘momentum rule’, which would have allowed proposals to be excluded if support dipped from historic levels, the final rules generally remained unchanged. Given the positive impact that the shareholder proposal process has had on improving ESG and specifically corporate governance practices at U.S. companies, this outcome is disappointing.

Advancing climate change management and reporting standards – Engagement collaboration

The Climate Action 100+ initiative, which now represents assets of US $47 trillion, has written to all 161 companies asking for disclosure against a set of common climate change criteria and metrics, including targets, governance and strategy. Company responses will be used to create a public benchmarking report, due in the first quarter of 2021.

BMO GAM signed up to the CDP Science-Based Targets Campaign. This targets over 1,800 companies across sectors and regions, asking them to set long-term emissions targets consistent with a net zero carbon world by 2050 to limit the global temperature rise to 1.5°C. The campaign aligns with the asks we are making to companies within the more focused Climate Action 100+ campaign as well as our own engagement approach.

The timing of these two developments is particularly important as we seek to build momentum ahead of the rescheduled COP26 climate negotiations in 2021.

Regulation on disclosure also continues to tighten, with developments including the UK government consulting on mandatory climate risk reporting in line with the Task Force on Climate-related Financial Disclosures (TCFD) by large domestic pension funds, and a proposal by the New Zealand government of mandatory TCFD reporting for large corporates and financial institutions.

Workforce Disclosure Initiative update – Reporting standards

BMO GAM has been an investor signatory to the Workforce Disclosure Initiative (WDI) since its inception in 2016. We have been actively engaging companies to disclose to the WDI’s annual survey since the beginning, and have engaged the WDI to make their survey meaningful and manageable for investors and corporates. Key findings from the evaluation of the submissions by 118 companies to 2019’s survey include that companies are generally reluctant to provide data on staff turnover as well as on internal accountability mechanisms to support workforce governance structures, and that they are willing to submit more data against workforce metrics for permanent employees than their temporary counterparts. Another finding is that the concept of a Living Wage is not universally understood by companies, which we are not entirely surprised about. This will help inform our engagement activities linked to our Living Wage engagement project.

This quarter we reached out to 62 companies to respond to the 2020 annual survey, which launched on September 1st. We also hosted a Q&A session together with representatives from the WDI to explain the relevance of the survey to investors, use cases, and details around the survey’s questions and support provided for companies, such as pre-population. Nine companies, including Novartisadidas and Continental, attended the videoconference.

Countering the decline of Indian labour laws – Engagement collaboration

In Q2 2020, two Northern India states announced that as a reaction to reductions in production demand due to COVID-19 they would suspend labour laws for three years. Worker impacts would include wages well below regional minimum wage, no right to accrued social or pension benefits, and no protection against layoffs. These would in turn exacerbate risks of exploitation and poverty. To better understand the regional landscape and investigate potential engagement angles, we reached out to the Indian office and the CEO of the Ethical Trading Initiative as well as the NGO ShareAction. With ShareAction we jointly approached seven multinational brands where we found evidence of sourcing from the affected states, such as The Gap, Esprit and Marks and Spencer. We asked them to work with their suppliers to maintain the standards of pre-COVID labour laws, including salaries at or above minimum wage with a target of moving towards a living wage, enhancing the number of “regular vs contract” workers, and reducing the proportion of indirect/casual labour in favour of directly employed workers. We expect to hear back from the brands by the end- September, with two calls/video conferences scheduled for later this quarter.


Pushing for a healthier product offering – Engagement collaboration

As a member of ShareAction’s Healthy Markets initiative, we signed joint letters to seven UK supermarkets to ask them to support efforts against obesity by promoting healthier eating habits and setting ambitious targets to increase their offering of low-calorie and low-sugar products. The initiative is supported by investors representing over $1 trillion in assets under management and targeted TescoSainsbury’sMarks & SpencerMorrisonIcelandAsda and Co-op. It also highlighted the responsibility of supermarkets to help consumers make healthier choices by improving front-of-pack nutrition labelling.


The Covid-19 pandemic has struck those with underlying health conditions especially hard, with the risk of death being 33% higher for obese people. This reinforces the societal costs of the abundant supply of unhealthy products. In addition to supporting a healthy society, adapting their offering will help supermarkets benefit from the growing number of consumers actively looking for healthier alternatives and position themselves to better manage a potentially stricter regulatory environment.


Stronger farm animal welfare practices is good for business – Engagement collaboration

In July 2020, BMO GAM signed the Business Benchmark on Farm Animal Welfare’s (BBFAW) Global Investor Statement on Farm Animal Welfare. The Investor Statement is now supported by 33 institutional investors, representing £2.5 trillion in assets under management.


As a signatory to this Investor Statement, we are publicly affirming our view that farm animal welfare is a material investment risk. We recognise that consumers have growing concerns about animal welfare, and believe that food companies demonstrating leadership on farm animal welfare are more likely to attract and retain consumers. We are, therefore, asking companies to raise farm animal welfare standards not only in their own operations, but also in their supply chains. Furthermore, we welcome clear and transparent reporting on this issue. The BBFAW is an important tool for encouraging food companies to improve their reporting, and for highlighting leading practices as well as areas for improvement. We will incorporate the findings of the BBFAW in our engagement with the food industry to hone in on the key issues we want companies to address.


Our engagement highlights

  • 295 companies engaged: 88 in North America, 135 in Europe, 37 in Asia (ex Japan), 8 in Japan, and 27 in other geographical areas.
  • 43 milestones achieved. We measure and report the success of engagements through “milestones”, which recognise improvements in company ESG policy, management systems or practices.
  • 31 total countries covered.

Companies engaged by issue

Companies may have been engaged on more than one issue.


  • Climate Change: 87
  • Environmental Stewardship: 51
  • Business Conduct: 21
  • Human Rights: 32
  • Labour Standards: 191
  • Public Health: 129
  • Corporate Governance: 72


Milestones achieved by issue

  • Climate Change: 8
  • Enviornmental Stewardship: 9
  • Business Conduct: 1
  • Human Rights: 1
  • Labour Standards: 3
  • Public Health: 2
  • Corporate Governance: 19

Share voting results

  • Company meetings voted: 1,125
  • Items voted: 10,284
    • For: 82.2%
    • Against: 13.8%
    • Abstain: 0.9%
    • Withhold: 3.0%
    • Do Not Vote: 0.06%

Votes by isssue

  • Directors & Board: 56.0%
  • Remuneration: 24.6%
  • Capital Related: 4.1%
  • Shareholder Proposals: 1.3%
  • Other: 14.0%


Share voting results 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.

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.

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 simplified prospectus.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

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