BMO Global Asset Management, an affiliate of Columbia Threadneedle has pledged to prioritise engagement with companies on environmental issues such as climate change, biodiversity, human rights issues, and executive pay.
Claudia Wearmouth, co-head of BMO GAM’s responsible investment team said that the ongoing Covid-19 pandemic and extreme weather events have reinforced the importance of creating a more resilient future, with climate change, biodiversity loss and human rights requiring urgent action.
“Active ownership is a key cornerstone of our work, and we have a role to play as a conduit to concentrate and amplify our clients’ voices with companies,” said Wearmouth.
“It can take time to build consensus for change within a business and to develop the tools to do so. We support companies on that journey, but in 2022, a key focus of our work will also be holding companies accountable on their commitments.”
In 2022, climate engagement activity will focus on the phase out of coal generation by 2030 for developed markets and 2050 for developing markets, the company said. While engagement spans all sectors BMO GAM (EMEA) will concentrate activity on mining and utilities industries that builds on engagements efforts in 2021.
This includes identifying laggard countries and companies where there is the most potential for change, including the US, Japan, and South Korea.
In addition, the firm will engage with financial institutions to ensure net zero strategies are implemented, as well as a carefully managed decline of coal, oil, and gas within lending and underwriting portfolios.
Alice Evans, co-head of BMO GAM’s responsible investment team, said that COP26 proved a catalyst for action, with over 3,000 corporates and financial institutions representing $130 trillion in assets taking on net zero commitments.
“Concerns on net zero-washing abound and our 2022 engagement agenda will have a sharp focus on implementation, ensuring that these commitments are backed up by concrete actions to decarbonise,” said Evans.
In the year ahead, BMO GAM (EMEA) will also focus on biodiversity, which includes increased engagement with companies in sectors including food and beverage, extractives, materials, transportation, and finance to set out strategies, governance, targets, and metrics to mitigate biodiversity risks.
BMO GAM (EMEA) will also focus on ESG risk metrics in executive pay which includes engagement with companies in industries including oil and gas, mining, materials, electric utilities, transportation, and automotive and financial institutions on how executive pay is linked to climate strategy.
The firm said it will advocate for the introduction of risk-related preconditions to bonus awards, ensuring inappropriate incentive payments are not awarded in the event a company’s financial strength or credit quality might deteriorate.
BMO GAM (EMEA) will also engage with chemicals companies to reduce greenhouse gas emissions to minimise harmful effects on local communities, reduce plastic waste and invest in recycling technologies to “close the loop” on plastic waste through the adoption of a circular economy.
The firm added that effective supply chain management practices will also be essential to protect human rights.
In 2022, BMO GAM (EMEA) will engage with corporates on implementing human rights due diligence across supply chains. With an over-reliance on social audit firms to assess supplier compliance, BMO GAM’s Responsible Investment team will focus on ensuring audit quality, and for companies in apparel, retail, and service sectors, on appropriately fulfilling their human rights and labour standards obligations.
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