14 August 2017
This guest blog forms part of our responsible investment in practice series where we talk to a number of investment managers about their approach to responsible investment in different asset classes.
Jamie Jenkins of BMO Global Asset Management is Head of Responsible Global Equities and fund manager of the F&C Responsible Global Equity Fund.
Q: How do you incorporate ESG into your investment approach?
Our approach is centred on sustainable companies that are proactively and effectively managing their ESG opportunities and risks to make a positive impact on society and the world. We have a 3-pronged philosophy of:
- Invest in companies making a positive contribution to society and the environment;
- Avoid companies with damaging or unsustainable business practices;
- Improve - use our influence as an investor to encourage best practice management of environmental, social and governance issues through engagement and voting. We have a commitment to increased transparency surrounding the companies in our strategy and their impact.
Q: What is distinctive about your ESG approach?
Our three layers of expertise set us apart from peers – experience, insight and integrity. The BMO Responsible Global Equity Strategy is managed by three dedicated teams, with the process led by the Responsible Global Equities team and supported by our in-house Governance and Sustainable Investment (GSI) team and the external, independent Responsible Investment Advisory Council.
Q: How do you engage with the companies you invest in?
We plan our annual engagement programme by identifying ESG issues that present the greatest threats to long-term investor value. We use quantitative and qualitative research to identify thematic projects and priority companies – those with the most material ESG risks and where we have the highest exposure – for more focused in-depth engagement activities across the year.
In 2016, we actively engaged around 800 companies. These involved approximately 340 meetings, most of which were one-to-one interactions. Where more effective, we worked with other investors through collaborative initiatives. There were nearly 100 discussions with senior executives or board directors. In 2016, we recorded nearly 200 instances of change (‘milestones’) achieved at companies.
Q: How do you expect your ESG approach to evolve over the next few years?
The Sustainable Development Goals (SDGs) were introduced in 2015 as a set of globally-agreed goals which guide governments, companies, investors, civilians and a variety of other stakeholders towards achieving greater economic, environmental and social prosperity by 2030. For responsible investors, the SDGs are increasingly becoming a widely recognised framework within which to assess the impact of investment and engagement-related outcomes. In light of this, in 2016, we established an initiative to connect the SDGs to our engagement programme and our Responsible Funds range. There has been further progress on this through 2017 and this will become an increasingly important element of our ESG approach in coming years.
Q: What do you see as the barriers to investors adopting an ESG approach to their investments in this asset class?
The single greatest barrier is the perception that using an ESG approach requires investors to compromise on the performance that can be achieved. Increasingly, we believe that quite the reverse is true and that our ESG approach can actually reduce risks and enhance returns over the longer term for investors, as evidenced by the fact that we have top quartile returns against the entire Investment Association (IA) Global sector over 3 and 5 years (to 31 May 2017).
The views and opinions expressed in this blog are the current views of the author only. Lane Clark & Peacock LLP (“LCP”) does not endorse or recommend any particular products and does not warrant the completeness or accuracy of these views. They do not necessarily reflect the opinion of LCP. In no event will LCP, or its partners, employees or agents, be liable to you or anyone else for any decision made or action taken, in reliance on the information in this blog.