ESG Viewpoint – Voting for climate action

Discover how we voted for climate action in 2020
January 2021

Vicki Bakhshi

Director, Analyst, Responsible Investment Team

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Derek Ip

Vice President, Analyst, Responsible Investment

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Kalina Lazarova

Director, Analyst, Responsible Investment

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Let’s talk about risk

The value of investments and any income derived from them can go down as well as up 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 companies that may be mentioned.

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.

With less than 12 months until the critical COP26 climate negotiations, momentum is building towards the ambition to limit the global temperature rise to no more than 1.5°C. Achieving this means aiming for net zero global greenhouse gas emissions by 2050, and a 50% cut in emissions between now and 2030.

The need for urgent action is clear

BMO GAM itself has committed to an ambition of net zero emissions in our investments by 2050, as part of the Net Zero Asset Managers Initiative.

As part of our stewardship approach, we have been working with other investors to urge companies to align with these goals. However, dialogue alone is not enough, particularly where companies are not meeting even basic expectations or are resistant to engagement.

 

Fostering climate action through proxy voting

We believe that mobilising our voting power is an essential part of effective climate stewardship. We have developed a voting policy aimed at encouraging the transition to a low-carbon economy. Importantly, this policy is not limited to considering how we vote on climate shareholder resolutions; we also consider how we exercise our votes on management resolutions.

During the 2020 voting season, we implemented a systematic process for identifying investee companies that have fallen behind in climate risk management based on a set of criteria. Where we judged these companies to be climate laggards, we voted against relevant management resolutions, such as the re-election of directors.

We expect our approach to evolve as emerging best practices become better known and adopted across different markets. This evolution will include setting tougher expectations of a greater number of companies and sectors.

 

Voting against laggards

In 2020 we aimed to send a strong signal to our investee companies across six of the most material sectors that inaction on climate change is not an option. The six sectors covered were:

 

  • Oil & Gas
  • Mining & Metals
  • Materials
  • Electric Utilities
  • Transportation & Autos
  • Financial Institutions

 

At the time of writing, we had raised our concerns via 61 management proposals across 58 company meetings. On these, we either voted against management resolutions, abstained, or supported but with communication on the specific conditions for supporting next year’s vote. This dynamic treatment reflected the fact that companies were falling short of our expectations to varying degrees.

Let’s talk about risk

The value of investments and any income derived from them can go down as well as up 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 companies that may be mentioned.

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.

Use our handy terms to look up any technical terms you are unfamiliar with.

Download the full viewpoint to discover the details of our voting activities and read our expectations for 2021 – plus a case study on ExxonMobil Corporation.

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