Our engagement in 2018

Engaging our companies on ESG issues is a cornerstone of our overall approach to investing.

Risk Disclaimer 

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 companies that may be mentioned.

Engaging our companies on those ESG issues presenting the greatest threats or opportunities to long term shareholder value is a cornerstone of our overall approach to investing.

Environmental: 20% of our engagement was on environmental issues, and climate change remained firmly in the spotlight. Extreme weather events and calls for global action to curb emissions easily made climate change one of the top stories in 2018 worldwide. We engaged actively with companies across highly-exposed industries on issues such as emissions management, adaptation, innovation and climate-related disclosures. Besides climate change, we spent time talking to relevant companies about their approach to tackling plastic pollution, an issue for which public awareness and action, and hence business risks, snowballed last year.

Social: 40% of our engagement was on social themes and we continued doing extensive work on labour practices. Areas of particular focus were modern slavery, freedom of association, and supply chains.

We also stepped up our efforts on health issues linked to sugar, as governments and the general public pay increasing attention to the consequences of high sugar consumption. We engaged food & beverage and restaurant companies around the world to encourage them to incorporate regulatory developments and changing consumer preferences as they work on their long-term business strategies.

Governance: 40% of our engagement was on corporate governance topics in 2018. Given that well-functioning boards are critical for long-term value creation, our governance engagement has continued to be focussed on board effectiveness. In addition, we discussed topics relating to director nomination, board composition, diversity, refreshment, evaluation, internal controls and executive remuneration.

Sustainable Development Goals: The 17 Sustainable Development Goals (SDGs) were developed by the UN and cross-industry stakeholders with a view to providing a roadmap towards a more sustainable world. The SDGs, which were endorsed by all 193 UN member states, are ambitious and high-level with 169 underlying targets. In 2018, we advanced our work to understand how our engagement can support the SDGs. Whereas previously we considered this at a goal level, we now use the detailed underlying SDG targets to frame company engagement objectives, where relevant, as well as to articulate the positive societal and environmental impacts of engagement.

Risk Disclaimer 

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 companies that may be mentioned.

engagements

companies

countries

2018 saw us engage with 665 companies across a range of environmental, social and governance issues

Engaged 26 times on improving corporate nutrition strategies – targets 2.1 and 2.21

Focus areas included: encouraging increased reformulation, clear labelling and responsible marketing.

Engaged 224 times on board diversity2 – target 5.53

Focus areas included: board level gender diversity issues, alongside the wider labour management and cultural issues.

Engaged 57 times on improving water management – targets 6.3 and 6.44

Focus areas included: water risk assessments, implementation of targets and strategies, and the governance of water-related issues.

Engaged 32 times on ending modern slavery – target 8.75

Focus areas included: encouraging best practice and taking responsibility beyond Tier 1 suppliers.

Engaged 41 times on reducing marine pollution – targets 14.1 and 12.56

Focus areas included: encouraging the reduction of single use plastic packaging, increasing recycled material in packaging, innovating materials and strategic implementation.

Our experience is that companies welcome this development in our engagement approach. Increasingly, there is pressure on companies to effectively disclose ESG information and we believe the SDGs provide a framework to streamline this for use by various stakeholders.

We are continuing to develop and deepen our work on applying the SDGs. In 2019 we are systematically capturing engagement at a target level, where applicable, to enable greater accuracy and achieve higher impact.

During 2018, the two most frequent links to SDGs were to SDG 12 (14%) relating mainly to environmental supply chain management, improving ESG disclosure, and the management of pollution impacts, and SDG 3 (13%), which included encouraging enhanced access to medicines and responsible drug pricing.

18% of our engagement didn’t directly link to an SDG; mainly where corporate governance issues were discussed solely, not in conjunction with other themes. These extremely valuable engagements we see as a foundation for the achievement of all 17 Goals, with well-governed companies better able to manage ESG risks and opportunities.

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Investment without engagement is irresponsible investment

The Most Reverend Justin Welby, Archbishop of Canterbury, President of the Responsible Investment Advisory Council

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1 SDG 2.1 End hunger and ensure access to safe and nutritious food; SDG 2.2 End all forms of malnutrition, particularly for children and women
2 In general this has been on gender diversity, but some other factors will be captured here
3 SDG 5.5 Ensure full equality of opportunity for women, including at leadership levels
4 SDG 6.3 Improve water quality by reducing pollution; SDG 6.4 Increase water-use efficiency to address water scarcity
5 SDG 8.7 Eradicate forced labour, end modern slavery & human trafficking
6 SDG 14.1 Prevent and reduce marine pollution of all kinds; SDG 12.5 Reduce waste through prevention, reduction, recycling and reuse
 
In 2018, additionally to our engagement, we had a further 2,067 communications, including on votes against management and the introduction of our new global voting policy, where we mainly wrote to the Chair updating them on our new approach.

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