2020: The year of climate action

BMO’s overriding engagement priority for 2020 will be climate change, focusing across sectors, and working collaboratively where we can.

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The world is facing a climate crisis. Since the Paris Agreement, we have supported the ambition to limit global warming to well below 2oC and pursue efforts to limit the rise to 1.5oC. The next decade is absolutely critical to meeting this ambition.

Global emissions need to peak and decline to keep the chances of meeting the Paris goals alive. We will use our influence to engage with investee companies; offer opportunities for our clients to invest in solutions; and encourage strong action by policymakers.

Coal phase-out

Coal is the most carbon-intensive of the fossil fuels. We see a phase-out of unabated coal generation by 2030 for developed markets, and by 2050 for developing markets, as essential to achieving the Paris goals. Whilst some countries are phasing out coal-fired power for cleaner alternatives, elsewhere new coal-fired power is still being built. We will seek to engage companies to encourage them to commit to phasing out coal in line with these timescales.

Financial institutions and climate risk

Climate change poses pronounced risks to the stability of the global financial system. We will work with selected systemically important global financial institutions that, through their loan and underwriting portfolios, are significantly exposed to climate change-related risks, to encourage them to adopt stronger mitigation strategies, and to report in line with the Task Force on Climate-related Financial Disclosures (TCFD).

Marine transport

Marine transport currently accounts for over 2% of global greenhouse gas emissions1, and these could grow between 50% and 250% by 20502, mainly due to the expected growth of global maritime trade. We will reach out to companies in this industry to encourage the deployment of investment plans for cleaner vessels and equipment, emission reduction programmes, better disclosure of climate change-related risks, and positive public policy positioning.

Strategically important high-emitting companies

Climate Action 100+ is a global five-year investor initiative that targets the world’s largest corporate greenhouse gas emitters, asking them to develop low carbon business strategies and strengthen climate-related governance as well as financial disclosures. We lead on a number of company engagements in sectors including automotives, utilities, oil & gas and steel production, and will continue to do so.

Sustainable food systems

Agriculture, forestry and other land use account for almost a quarter of global greenhouse gas emissions3, much of this driven by the food production system. The food chain also has extensive, wider impacts beyond climate change on our natural environment.

We will seek to drive change in some of the world’s largest food producers, traders and retailers to allow them to meet growing food demand whilst halting environmental degradation and curbing greenhouse gas emissions. We will also engage with food retailers to address issues related to food consumption, including marketing and waste.


Our stewardship work in 2020 will of course be impacted by the COVID-19 pandemic. We will continue to pursue our priorities, sensitive to the exceptional circumstances that companies find themselves in. Our Viewpoint ‘ESG Implications of the COVID-19 pandemic’ sets out our initial views on how the ESG agenda will be affected, and sets some principles for how companies should respond in areas including treatment of staff.


1 “Executive Summary”, Third International Maritime Organisation (IMO) Greenhouse Gas Study 2014, IMO, http://www.imo.org/en/OurWork/Environment/ PollutionPrevention/AirPollution/Documents/Third%20Greenhouse%20Gas%20 Study/GHG3%20Executive%20Summary%20and%20Report.pdf

2 Same as above

3 “People, land and climate in a warming world”, IPCC Special Report on Climate Change and Land 2019, IPCC, https://www.ipcc.ch/srccl/chapter/summary-forpolicymakers/

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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 products that may be mentioned.