In December 2020, we announced our ambition to reach net zero emissions by 2050 or sooner across all assets under management, as a founder signatory to the Net Zero Asset Managers initiative. This commitment builds on our existing actions on climate change, and also forms a key part of our parent company BMO Financial Group’s climate ambition to be our clients’ lead partner in the transition to a net zero world.
Three principles for action
2021 will see us working on implementing our approach to managing our assets in line with our new net zero commitment through our 3-principle approach:
- Focus on real-world emissions reductions
Selling carbon-heavy companies can cut a portfolio’s carbon intensity dramatically but has little impact in the real world. Instead, we aim to use the power of our engagement to encourage these companies to take action to reduce their emissions.
- Work in partnership with clients
As asset managers, our fundamental responsibility is to meet our clients’ current and future investment needs. Many clients will have questions about what net zero means and so our aim is to work with them to educate them on what the low-carbon transition means when applied to portfolios.
The risks of ‘net zero-washing’ are real. Methodologies are still emerging and disclosure by corporates remains patchy. We’ll therefore be straight with our clients and wider stakeholders about limitations in our approach, including gaps in data or methodology.
Defining a ‘net zero aligned’ investment portfolio is no straightforward task. To guide our implementation, we are looking to the Net Zero Investment Framework, developed by the
Paris Aligned Investment Initiative, with input from BMO GAM. This is a comprehensive
framework, covering governance, target-setting, methodologies for specific asset classes, and policy and stakeholder engagement.
COP26 and beyond
2021 is a crucial landmark year in the fight to tackle the climate crisis, and every part of society needs to play its part. We will continue our engagement with companies and our efforts to decarbonise portfolios, supporting the low-carbon transition in the real economy – and will also be part of the collective investor voice calling on governments to be visionary and ambitious in the way they approach the Glasgow COP26 negotiations. Strong action now is essential to set the world on a trajectory to a more stable climate and a healthier planet.