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
- 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.