Climate change and social issues dominate fund manager engagement

News Team, 06/05/2022

BMO Global Asset Management (BMO GAM) has revealed that responsible investing dominated its engagement with businesses.

The firm, which will rebrand to Columbia Threadneedle Investments in July 2022, released its 2021 Stewardship Report this month. The report highlighted its engagement with over 940 companies globally, on key issues including labour standards, climate change and biodiversity.

Nealy half of all engagements, 45 percent, focused on social issues, with labour standards a primary focus. Following closely behind, 43 percent focused on environmental issues and 22 percent on governance issues.

The majority (85 percent) aligned with the United Nations Sustainable Development Goals.

The report highlights companies’ aims to drive positive change at investee companies, with 25 percent more companies engaged with than in 2020.

The report also recorded 388 ‘milestones’ were achieved, where companies improved ESG policies and practices in alignment with BMO GAM’s engagement objectives.

Of the 388 ‘milestones’ achieved, 44 percent were linked to corporate governance, 22 percent to climate change, and 14 percent linked to labour standards.

Labour standards were a key focus area as BMO GAM aimed to continue efforts to engage on the living wage in retail and garment sections.

Engagement also aimed to focus on encouraging workplace diversity, both on gender and ethnicity. It did so by joining the US 30 percent Coalition, as well as the newly founded 30 percent Club in France, whilst continuing to work with the Interfaith Center on Corporate responsibility (ICCRR) on racial equity.

It also launched a dedicated engagement with more than 50 German companies listed on the mDAX focused on executive board and senior leadership diversity, policies, and implementation programmes to enhance workforce diversity.

Climate change was also seen as a priority for BMO GAM in 2021. Action to address climate change accounted for 23 percent of all engagement activity.

It called for companies to set shorter-term interim targets for climate change matters, as well as for the integration of climate goals in governance structures and executive pay and reporting in line with the Task Force on Climate-related Financial Disclosures (TCFD).

Climate change engagement ranged across sectors and regions and included fossil fuel firms, energy consumers, and the finance sector.

Finally, BMO GAM aimed to engage with companies to explore biodiversity-related impacts and dependencies. Over two fifths of the 2021 ‘milestones’ were linked to corporate governance to understand how companies incorporate current environmental initiatives under a biodiversity umbrella.

It also developed a proxy voting policy focusing on companies with high exposure to biodiversity impacts but lacking adequate disclosure. As well as this, BMO GAM joined the Investor Policy Dialogue on deforestation, focusing on sovereign engagement in Brazil and Indonesia.

Furthermore, it signed a letter calling for a global framework on biodiversity, as well as letters to both EU and UK authorities, urging agricultural policies to be designed to restore biodiversity and address climate change.

It is also a member of the PRI Sustainable Commodities Practitioners’ Group and collaborates with other investors under the FAIRR Sustainable Proteins initiatives.

Claudia Wearmouth, co-head of responsible investment at BMO GAM, said: “The huge groundswell of interest in responsible investing can leave no doubt that investors have high expectations of company ESG performance, and will not hesitate to use their voice and their vote to drive change.

“2022 will see us continue this work and widen our environmental agenda to include a greater focus on biodiversity, including our leadership in founding the Nature Action 100 initiative.”

BMO Global Asset Management (BMO GAM), aimed to strengthen its responsible investment team with the appointment of two specialists last year.

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