Stakeholder Engagement - Enhanced value through active engagement

In 2000, we introduced our unique approach to responsible investment by launching our Responsible Engagement Overlay service, known as reo®. This differs from traditional ethical screening or a best-in-class portfolio construction methodology: it is an overlay that can be applied to any equity or corporate bond mandate, irrespective of whether the money is managed by BMO Global Asset Management. It does not interfere with the fund manager’s portfolio construction or selection – in other words, it allows fund managers the widest latitude in defining their investable universe, while addressing sustainability concerns through active dialogue and changing behaviour.

Our ultimate aim is the creation and protection of long-term capital value for investors. The objective of reo® is to use the influence that we wield through the combined equity and bond assets of all our clients to encourage investee companies to adopt better environmental, social and governance (ESG) practices and changes in corporate behaviour, thereby enhancing their business performance. We believe that we can best serve our clients and enhance the value of their investments through sustained and constructive dialogue with companies, as well as the judicious and transparent use of voting rights.

Over the course of 2017 we engaged with 1,363 companies in 62 countries on a wide range of business issues. We voted at more than 9,400 shareholder meetings. reo® is currently applied to over £120.9 billion* of assets.
*as at 31.03.2018

SEI Voting

We believe exercising our voting rights is central to encouraging good governance, and as with shareholder dialogue, we also have the technical capability to exercise voting rights on behalf of clients whose portfolios are managed by external fund managers. We seek to understand the circumstances of each company, encouraging companies to provide explanations if their policies deviate from good practice. We also engage with companies both before the vote, to explain the standards we expect, and afterwards, to explain the reasons for any votes against management. Investors will increasingly demand transparency and protection from long-term ESG risks for their investments.

How we voted in 2014

Description Number of Resolutions Votes with Management Votes against Management No Vote*
Board elections 34,415 74.4% 24.1% 1.5%
Capital structure 5,734 77.1% 21.7% 1.2%
Remuneration 6,213 54.9% 44.0% 1.2%
Routine & Other Business 17,915 90.7% 6.3% 3.0%
Shareholder Proposals 1,402 60.1% 33.5% 6.3%
All Proposals 65,679 76.9% 21.1% 2.0%

*The majority of ‘no votes’ take place in markets that employ shareblocking, where most clients elect not to vote so as not to constrain their investment decisions. The ‘Routine & Other Business’ category also includes non-voting proposals which is the reason for the relatively high proportion of no votes.

Totals may not sum to 100% due to rounding.

Typically companies will advise investors to vote against shareholder resolutions. Hence a vote in favour of a shareholder resolution is counted in our statistics as a vote against management, and vice-versa.

Public Policy

Whilst much of the Governance & Sustainable Investment team’s work involves one-to-one engagement with companies, sometimes it is more effective for many investors to join together, pool their resources and co-ordinate their approach. For this reason, we actively participate in many collaborative investor networks across the world. We also collaborate with investee companies where we can to drive improvements in policy and practice, through working groups and joint initiatives on a wide range of ESG issues.

We see participation in the public policy process as a central part of being a responsible investor. Whilst a few forward-looking companies will voluntarily take a leadership position on issues such as climate change, corruption or labour standards, it is often only when the playing field is levelled through regulation that a step change occurs. As investors, we can communicate to governments and regulators what type of policies will improve ESG standards in a way that also enhances competitiveness and long-term value for investors.

 

2014 public policy submissions

Please contact us at governance@bmogam.com if you would like further information on any of the submissions below.

Month Issue Initiative
January Governance Response to UK Law Commission consultation on fiduciary duties of investment intermediaries
February Climate Joint investor letter to EU heads of state to support an ambitious 2030 emissions reduction goal
February Governance Response to Stewardship Code proposals in Japan
March Governance Participation in investor meeting with German Corporate Governance Code Commission to discuss director nomination process
March Labour Joint investor letter to the UK government calling for the inclusion of supply chain reporting in the Modern Slavery Bill
April Governance Joint investor letters to the SEC on the Dodd Frank Act in support of robust transparency for extractives companies
April Governance Submission to the Ontario Securities Commission on the proposed diversity disclosure amendment among Toronto Stock Exchange listed companies
June Climate Endorse World Bank call for putting a price on carbon
August Governance Investor statement to the International Organization of Securities Commission to improve global corporate disclosure on ESG issues
September Climate Global Investor Statement on Climate Change which was sent to heads of state at the UN Climate Summit in New York
October Environmental Investor call for the US Environmental Protection Agency to regulate methane emissions from the oil and gas industry
October Climate Letter by the Institutional Investors Group on Climate Change calling for strong EU 2030 climate change targets
December Environmental Investor statement supporting the development of a robust market for climate and green bonds
December Governance Letter to the Brazilian regulator to strengthen and ease the proxy voting process
December Governance Support the European Commission’s proposal to seek shareholder approval for material Related Party Transactions under the Shareholder Rights Directive

Corporate Governance Guidelines

As part of our commitment to good corporate governance we prepare Corporate Governance Guidelines to guide our voting activities. They are intended to give companies a practical sense of how we are likely to vote on their stock, and they outline our thinking on individual issues and resolutions. We update these Guidelines every year and send them to the companies in our own portfolio and to the companies in the portfolios of our reo® clients.

In applying our policies and guidelines in our voting, we seek to evaluate each company’s case on its merits, and rely on judgment and dialogue with companies to ensure a reasonable and pragmatic outcome. While we strongly encourage companies to adopt commonly-accepted standards of good practice, we also appreciate that exceptions may be legitimate in some cases and are open to making special considerations when so warranted.

We believe that certain principles of good governance are universal, yet we also appreciate that practices vary across markets; we therefore strive to take a nuanced position that reflects the particular circumstances of each market and takes into consideration differing stages of economic and financial development, ownership structures, legal regimes and regulatory requirements.

Questions?

Get in touch +44 (0)20 7518 3636

Risk Warning

The value of your investments and any income from them can go down as well as up and you may not get back the original amount invested.