Responsible Investment

Climate change

Climate change presents a systemic risk to the global economy, which is perhaps unprecedented in scale.
April 2019

Risk Disclaimer 

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.

Climate change

Climate change presents a systemic risk to the global economy, which is perhaps unprecedented in scale. BMO Global Asset Management has engaged on the topic for over a decade, calling on governments and regulators to put policies in place for an orderly transition to a low-carbon economy, and asking companies to implement strategies to incorporate climate risk into their business planning. Companies that are proactive in recognising the transition, and providing solutions, should see their business grow as actions to achieve the Paris goal of keeping the global temperature rise to well under two degrees intensify.

Climate Action 100+

Climate Action 100+ is a global collaborative investor engagement initiative, launched in December 2017 at the One Planet Summit. It co-ordinates engagement with 100 ‘systemically important’ companies accounting for two-thirds of annual industrial greenhouse gas emissions, as well as over 60 others with the opportunity to drive the low-carbon transition. 

Investors with assets under management of over US$32 trillion have so far signed up, making this perhaps the largest ever global investor engagement collaboration. 2018 saw 277 meetings take place, 32 at board level.

Engagement

The initiative asks companies take action in three areas:

  • Governance: Implement a strong governance framework that clearly articulates the board’s accountability and oversight of climate change risks and opportunities.
  • Emissions management: Take action to reduce greenhouse gas emissions across their value chain, consistent with the Paris Agreement’s goal of limiting the global average temperature increase to well below 2-degrees Celsius. 
  • Disclosure: Provide enhanced corporate disclosure in line with the final recommendations of the Task Force on Climate related Financial Disclosures (TCFD) and, when applicable, sector-specific guidance.

 

BMO GAM has been an active participant in Climate Action 100+, acting as lead or joint lead on 4 companies, and participating in engagement with a further 14 companies. 2018 highlights included:

  • Speaking at the AGM of Fiat Chrysler to encourage a more proactive approach to the development of hybrid and electric vehicles.
  • Initiation of dialogue with South Korean steel giant POSCO, a company that has up to now been resistant to adopting climate management strategies such as scenario analysis.
  • Discussions with US utility Duke Energy after the publication of their Climate Report to shareholders, asking for further details on their coal retirement strategy.
  • Significant progress at Royal Dutch Shell following intensive engagement, with the company adopting strong ambitions to cut the net carbon footprint of both its operations and its products, committing to translate that ambition to medium-term targets to be integrated in the remuneration policy.

US$32 trillion AUM supporting Climate Action 100+


Risk Disclaimer 

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.

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Task Force on Climate-related Financial Disclosures (TCFD)

The TCFD was set up by the Financial Stability Board with the aim of establishing consistent, high quality climate risk reporting across sectors and regions. Its recommendations, published in 2017, are organised into four key areas: governance, strategy, risk management, and metrics and targets.

Our parent company, BMO Financial Group, is a supporter of these recommendations, and includes information on how it is implementing them within its 2018 Annual Report and ESG Report. Some of the recommendations are specific to asset managers, and BMO Global Asset Management will be publishing a separate statement on how it is applying these to its own activities.

A priority for us in 2018 was engaging with investee companies to encourage them to report in line with the TCFD, since good quality data from companies is essential in informing asset managers’ assessment of risk and opportunity.

We also co-led a working group organised by the Institutional Investors Group on Climate Change on how investors can apply climate scenario analysis to their portfolios. This brought together leading European asset owners and managers to discuss the purpose of scenario analysis; the scenarios available to investors; and analytical techniques to apply these to portfolios. The group published a report in late 20181, and at BMO GAM, we will be working in 2019 to assess how we can implement its findings.

1 Navigating climate scenario analysis – a guide for institutional investors, IIGCC (2018). In 2018 Vicki Bakhshi was an IIGCC board member and authored this report.

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