2020-2030

Discover the direction we believe engagement will take during this critical decade for achieving the UN Sustainable Development Goals.

The future of investor engagement

In the coming decade, we believe engagement will increasingly focus on both financial returns and sustainability outcomes. The achievement of the United Nations Sustainable Development Goals is critical not only for human development, but also for creating the right economic and social conditions for long-term prosperity.

BMO Global Asset Management’s voting, engagement and public policy work is conducted independently of the wider BMO Financial Group. Positions taken by BMO Global Asset Management may not be representative of the views of the BMO Financial Group as a whole or of the other lines of business within it.

Let’s talk about risk

All of our investment plans involve a level of risk and the value of your investments can go down as well as up. The level of risk will depend upon the underlying investments that you choose to hold in the plans. You need to be comfortable that you may not get back the original amount invested.

Emma Lupton, Vice President  in our Responsible Investment Team, talks about our engagement plans for the future, with a specific focus on the SDGs.

 

Measuring impact

The United Nations Sustainable Development Goals (SDGs) are a key reference point for measuring impact. They are 17 goals and 169 associated targets, providing a useful tool for companies and investors to be able to contribute to achieving a more sustainable future by 2030. The framework has created a common language between stakeholders, and we are seeing that have a positive impact within our engagement.

BMO’s contribution to SDGs in 2020

As pioneers in responsible investment, at BMO, we use the SDGs as a framework for engaging for positive change. Hover over the wheel below to discover how our engagement with companies in 2020 linked to the different goals and targets

In 2020, 79% of our engagement was linked to SDGs. We positively contributed to 10 of the 17 SDGs

Click on the wheel below to discover how our engagement with companies in 2020 linked to the different goals and targets.

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SDG Goal 1 - No Poverty - End poverty in all its forms everywhere

In 2020, 5% of our engagement linked to SDG goal 1

2020 was a catastrophic year for many retailers. However, the knock-on effects were not uniform. Economic fortunes for different retailers varied, but labour standards came into focus across all areas of the sector. We expanded our engagement with retailers in 2020 beyond the Living Wage to include broader social themes during the pandemic.
Read: ESG Viewpoint: living wage in the retail sector
SDG targets within the denoted goal that are less than 0.5%
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SDG Goal 3 - Good Health and Well-Being - Ensure healthy lives and promote well-being for all at all ages

In 2020, 3% of our engagement linked to SDG goal 3

India’s vast untapped market for healthcare and financial services offers significant growth prospects for companies looking to serve it. We believe that beyond reaping the financial benefits of increasing revenues, companies can and should play an active role in improving people’s livelihoods by making these services affordable and inclusive.
Read: ESG Viewpoint: Access for Growth in India
Antimicrobial resistance is a natural phenomenon being accelerated due to poor stewardship of antibiotics in healthcare and farming. We engaged pharmaceutical companies, food producers and food retailers on their approach to AMR issues. We will continue to benchmark best practices and encourage more robust commitments on addressing AMR.
Read: AMR in the Pharmaceutical and food industry
SDG targets within the denoted goal that are less than 0.5%
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SDG Goal 5 - Gender Equality - Achieve gender equality and empower all women and girls

In 2020, 8% of our engagement linked to SDG goal 5

Workforce disclosure is essential for investors to better analyse companies’ social performance. Companies’ workforce disclosure is still limited, often referencing data gaps or lack of appropriate data gathering systems. BMO Global Asset Management encourages companies to respond to the Workforce Disclosure Initiative (WDI) annual survey to underline accountability to their social commitments
Read: ESG Viewpoint: The quest for workforce disclosure
We engaged Germany’s largest listed companies on the lack of female representation at senior leadership levels. Find out the results and responses from those companies.
Read: Gender diversity – are German companies keeping up?
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SDG Goal 6 - Clean Water and Sanitation - Ensure availability and sustainable management of water and sanitation for all>

In 2020, 2% of our engagement linked to SDG goal 6

Achieve universal access to safe and affordable drinking water (SDG 6.1)
A healthy marine environment is critical to the health of the planet and its inhabitants. Currently only 2-6% of our oceans are classified as Marine Protected Areas (MPAs), and it is estimated that we need 30% protected to ensure a thriving ocean ecosystem. In addition to the social and environmental benefits, around $2.5tn of economic value is generated annually by the oceans. Read more about how our Responsible Investment team engage with companies on these issues.
Read: Focus on ocean health
SDG targets within the denoted goal that are less than 0.5%
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SDG Goal 7 - Affordable and Clean Energy - Ensure access to affordable, reliable, sustainable and modern energy for all

In 2020, 5% of our engagement linked to SDG goal 7

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.
Read: ESG Viewpoint – Voting for climate action
SDG targets within the denoted goal that are less than 0.5%
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SDG Goal 8 - Decent Work and Economic Growth - Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all

In 2020, 19% of our engagement linked to SDG goal 8

Technological advances have been the most significant driver of economic development over the last 200 years, with each industrial age transforming the way people live and work. But the depth and scale of labour displacement from A.I. automation could be much greater than previous industrial revolutions. Discover how artificial intelligence and automation could impact the future of work.
Read: ESG Viewpoint: Artificial Intelligence, Automation and the Future of Work
We engage around social issues consistently to ensure the application of labour management policies that provide a diverse, non-discriminatory and safe workplace, where workers are treated well and paid fairly. We encourage transparency and accountability within supply chains and direct operations to ensure best practice.
Read: ESG Viewpoint – Racial justice: the imperative for investor action
Our engagement in 2018 focused on companies required to publish modern slavery statements in line with the UK’s landmark Modern Slavery Act 2015. Since the introduction of this Act, modern slavery legislation has progressed in a number of countries, including Australia, Canada, France, and the Netherlands.
Read: ESG Viewpoint: Modern Slavery: Engagement Update
Labour issues are likely the biggest corporate theme resulting from the pandemic, with the impact on workers not been felt evenly. The implications for worker welfare differ significantly depending on the sector, the jurisdiction, and the nature of jobs. In 2020 we began engaging companies on their response to the global pandemic, calling for measures related to health & safety and the provision of mental health support, among others.
Read: COVID-19 and labour-related impacts
SDG targets within the denoted goal that are less than 0.5%
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SDG Goal 12 - Responsible Consumption and Production - Ensure sustainable consumption and production patterns

In 2020, 12% of our engagement linked to SDG goal 12

We engage with companies on the circular economy, the use of innovative materials, adopting product lifecycle assessments, improving recycling along the entire supply chain, and educating consumers on product use and disposal.
Read: Is the circular economy treading water?
In April 2018, the EU Member States endorsed the EU Commission’s proposals to ban all outdoor uses of three neonicotinoids (“neonics”). Since then, we have reviewed our engagement on chemical safety and biodiversity risk with ten agrochemical companies to see how they are responding to the new rules.
Read: ESG Viewpoint: Chemicals and biodiversity
2018 saw a significant focus on the issue of ocean plastics, spurred by the airing of Sir David Attenborough’s seminal documentary Blue Planet II and the awareness that more than 8mn tonnes of plastic reaches the oceans annually.
Read: Ocean plastics and the impact on the environment
The economic turmoil and social upheaval from the pandemic has put sustainability challenges at the heart of the global agenda. As investors, we must drive positive change through the responsible allocation of capital and engagement with companies. We have set out our three engagement priorities for 2021, focused on supporting a sustainable recovery from the pandemic and the 2030 target date for achieving the SDGs: the race to net zero, addressing biodiversity loss, and Supporting social justice and reducing inequality.
Read: Supporting a sustainable Covid-19 recovery through ESG engagement
SDG targets within the denoted goal that are less than 0.5%
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SDG Goal 13 - Climate Action - Take urgent action to combat climate change and its impacts

In 2020, 16% of our engagement linked to SDG goal 13

With a growing number of governments setting paths to net zero emissions, the future of coal is in question. It’s estimated that coal use would have to drop by 60% by 2030 to achieve a net zero future. Through our engagement, we seek to encourage companies with exposure to coal to be proactive in how they will manage the transition and avoid the risks of stranded assets.
Read: ESG Viewpoint: Coal's uncertain future
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.
Read: ESG Viewpoint – Voting for climate action
Indonesia is one of the world’s biggest emitters of greenhouse gases, driven by deforestation and land-use change. With palm oil, rubber, sugar and coal being vital to the country’s economic growth and trade balance, calls to address the climate impacts of their production and use face significant hurdles. Meanwhile, the intense monsoons and rain of January 2020, which left tens of thousands of people displaced, were a stark reminder of the country’s vulnerability to climate risks.
Read: ESG Viewpoint: Are Indonesian companies waking up to climate risk?
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SDG Goal 15 - Life on Land - Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss

In 2020, 2% of our engagement linked to SDG goal 15

Ensure sustainable usage of terrestrial freshwater ecosystems (SDG 15.1)
Palm oil production has serious social and environmental impacts. We consider how the Roundtable on Sustainable Palm Oil is addressing these issues.
Read: Can palm oil ever be sustainable?
SDG targets within the denoted goal that are less than 0.5%
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SDG Goal 16 - Peace, Justice and Strong Institutions - Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels

In 2020, 3% of our engagement linked to SDG goal 16

With the rapidly-developing situation, we are still in the early stages of understanding the impact that COVID-19 will have. However, some important implications for corporate governance practices and standards are already emerging.
Read: Corporate governance implications of the COVID-19 pandemic
Engaging with companies is an important way for investors to drive positive change at the corporate level. However, one-on-one engagement sometimes fails, and it becomes necessary to escalate our engagement strategy - from collaboration to filing shareholder resolutions.
Read: Investor engagement - routes to escalation
SDGs less than 2%.

2. Zero Hunger, 9. Industry, Innovation and Infrastructure, 10. Reduced Inequalities, 11.Sustainable Cities and Communities, 14. Life Below Water

The remaining 21% of our engagement focused on corporate governance, which we view as an essential building block in creating a more sustainable economy

21% of our engagement does not have a direct link to a specific SDG target. The majority of these engagement activities are on corporate governance, which we view as an essential building block in creating more sustainable, better run companies. The main exception is our engagement on board diversity, much of which has covered gender diversity issues, which we see as supportive of SDG 5 and targets 5.1 and 5.5 in particular, but has a wider application to the achievement of other goals such as SDG 8 and SDG 10.

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“The debate on ESG has moved beyond risk and opportunity. The more fundamental question now being asked is what is the role of the financial sector in creating a fairer and more sustainable society?”

Vicki Bakhshi, Director, Analyst, Responsible Investment

Working together for systemic change

Perspectives on stewardship are shifting towards looking more holistically at our responsibilities for shaping the market and economy as a whole. Climate change, ocean health, biodiversity and public health are all key systemic risks that cannot be addressed by engagement with companies alone. Investors must expand their focus to public policy, and building relationships with other stakeholders, including NGOs and academic experts.

Investors across the world step up

Over the past decade, engagement has been almost exclusively led by developed-market investors, primarily in Europe and the US. Given the increasing introduction of responsible investment regulations, guidelines and practices, we expect to see active ownership become a much stronger feature of the local investor agenda in other markets this decade.

Decade of climate action

This decade is vital to achieving the Paris Agreement goal of limiting global warming to well below 2°C, and engagement here is evolving. Collaboration is taking place at an unprecedented scale through the Climate Action 100+ initiative, while investors are increasingly expressing their dissatisfaction with companies failing to address climate issues by voting against management resolutions.

Vicki Bakhshi, Director in our Responsible Investment Team, provides her view on climate change engagement for the future.

 

The ‘S’ factor

The ‘S’ – social – of ESG has been historically difficult to define and quantify. But the COVID-19 pandemic has profoundly impacted society and shaken our assumptions about the way we live. It has also painfully exposed social and economic inequalities.

Against this backdrop, social issues are now among the most pressing issues for companies globally. It has also become clear that all elements of ESG are fundamentally linked and of equal importance.

This decade, we expect investors and data providers to overcome the challenges that have prevented the analysis and integration of social factors to step up their engagement, while carefully balancing interconnections with E and G issues.

Discover the history of investor engagement

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2000-2010:
Learn how investor engagement began to enter the mainstream
Discover more
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2010-2020:
Discover what drove the rapid growth in responsible investment approaches
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Our engagement insights

Responsible Investment
Macro views
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Gender Diversity – a decade of progress, but it must continue
6 min read
March 2020

Gender Diversity – a decade of progress, but it must continue

Gender diversity is progressing but we recognise there is still much more to be done to ensure organisations are diverse at all levels, beyond just the boardroom. Discover our engagement here from 2018-2019, as well as our voting plans ahead.
Read more