Five key themes are likely to shape the responsible investment agenda in 2019, says BMO Global Asset Management.
The themes will be an increased focus for the firm and are also directly relevant to UN Sustainable Development Goals (SDGs).
Vicki Bakhshi, director, responsible investment at BMO Global AM, said all five themes are material to investors, and of critical importance to the SDGs.
The five themes are:
1. Protecting vulnerable workers
The firm says: “Inadequate wages, weak safety practices and modern slavery all contribute to poverty and inequality and undermine the achievement of sustainable development and the targets of SDG1 and SDG8, which call for an end to global poverty and safe working practices.
“In 2019 we will continue to engage companies on how they are tackling modern slavery practices such as forced and child labour within their supply chains. New legislation is shining a spotlight on this issue through driving better disclosure. Based on the work we undertook in 2018, we have built an understanding of corporate best practice, and will use this to press companies to make improvements.”
The firm also said it would focus on seeing that the retail sector pays living wages, as corporate reputations are sensitive to allegations of poor staff treatment, and it will start a new strand of engagement around apparel sourcing practices and their impact on the environment and local populations, including the emerging risks arising from shifts toward sourcing from Africa as companies seek to diversify their supply chains.
2. Gender equality
The firm says: “The world remains a long way from achieving the targets set under SDG5 – gender equality. One area where there has been intensive investor focus, with some degree of success, has been on board-level gender diversity. However, with equality issues still deeply entrenched throughout the labour force, board diversity is only the tip of a very large iceberg.
“Building on our engagement at board level, in 2019 we will expand our focus to look more deeply at the representation of women at senior management level and below, linking to target SDG5.5. Based on an identification of best practices in areas such as mentoring, flexible working and pay, we intend to work with companies to identify barriers and encourage the adoption of forward-looking approaches – which should ultimately benefit company performance through attracting and retaining high calibre employees.”
3. Climate change
BMO Global AM says: “Climate change has been the subject of intensive investor focus over the past year, with the Climate Action 100+ initiative being one of the largest investor collaborations ever formed.
“Engagement has particularly concentrated on the oil & gas and mining sectors, and to a lesser extent, the energy-intensive industries such as utilities and automobiles, however the impacts of climate change range much more widely. In 2019 we plan to widen our own perspective through focusing on the role of the finance sector, in line with the focus of SDG 13 – climate action, which sets targets for climate finance. Our engagement will target banks in Southeast Asia, which have generally been slow to act on climate change – but are highly exposed to the risks, and may be missing opportunities to finance solutions.
“We also plan to initiate a dialogue with the marine transportation sector, which we believe so far has been under-engaged by investors, despite accounting for approximately 2% of global greenhouse gas emissions.”
4. Biodiversity and water
Here, the firm says that 2018 saw a huge rise in public awareness of the impacts of single-use plastics, and how plastic waste is impacting on ocean biodiversity, undermining the achievement of SDG14 – life below water.
“In 2019 we will continue to prioritise engagement with companies in the food and beverage sector, amongst others, on how they are responding, encouraging them to adopt a proactive approach to identifying more sustainable packaging, and to commit to phasing out single-use plastics.
“This focus will sit alongside our ongoing engagement on companies’ water use in line with SDG6 as the impacts of climate change exacerbate existing stresses from population growth and intensive agriculture. Companies can no longer view water as a free, non-exhaustible resource, and companies in water-intensive sectors need to factor in water planning as an integrated part of their business risk analysis.”
5. Anti-microbial resistance
“Antimicrobial resistance (AMR) jeopardises the effective prevention and treatment of infectious diseases and is widely recognised as an increasingly serious threat to global public health,” says the firm. “AMR is a natural biological phenomenon resulting from genetic changes – however, the misuse of antibiotics is accelerating this process, and has led to the emergence of infections which do not respond to antimicrobial therapy. Given that AMR is a pressing and complex problem, governments and companies in multiple sectors need to take action.”
BMO Global AM said it would focus its engagement on pharmaceutical companies, companies involved in meat or dairy production, and food retailers. These companies can play a pivotal role in slowing down the development and spread of AMR, the firm said.
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