We launched our BMO Sustainable Portfolios that invest in companies committed to positive environmental, social and governance (ESG) outcomes. The suite is proposed in 4 risk profiles: Income, Conservative, Balanced, and Growth. Our 5 Lenses framework is also applied in a similar fashion as what we do within our flagship BMO ETF Portfolios, but with an ESG set of building blocks, which includes actively managed equity and fixed-income mutual funds.
We like ESG because strategic interest has room to build, supported by fiscal policies globally. Governments are increasingly promoting sustainable investment projects, led by the European Union (EU). A third of the region’s COVID-19 rescue package is devoted to decarbonization and green technologies, or 10 times what other large economies spend. The EU’s next budget also includes stimulus to support the Green Deal, a plan to reach net zero emissions by 2050. The Deal itself will entail trillions of new green investments over the coming decades.
In the U.S., a Biden victory and/or Democratic sweep, which are currently favored in polls and betting markets, would allow for U.S. reengagement in global climate initiatives and a push toward stricter U.S. climate policy rules through both presidential and legislative actions. A Trump reelection would undoubtedly mean continued disengagement and potentially further deregulation, but at the same time other forces such as the private sector itself have proven to be important drivers as well. Indeed, ESG fund assets have nearly doubled in the past three years with significant inflows year-to-date, while ESG bond issuance is on track to reach $300bn in 2020. Shareholder activism, institutional interest, and preferences among Gen-Z and millennial generations are prominent trends driving ESG growth. Moreover, as a growing number of investors use ESG considerations, disclosure by firms has increased with 90% of S&P 500 companies publishing an ESG-focused report vs. 20% a few years ago.