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La Voie De La Reprise: Entretiens Avec Les Spécialistes

Director of ESG at BMO Talks ...

Doug A. Morrow octobre 27, 2021 | Sustainability Leaders

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  Disponible en anglais seulement. “I think it ...

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Euro-China at a Three-Year Low - ...

Greg Anderson, Stephen Gallo octobre 26, 2021 | FICC Podcasts

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  Disponible en anglais seulement. In this week's ...

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Why Now is the Time to ...

Paulette Jagers octobre 25, 2021 | Sustainability Leaders

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  Disponible en anglais seulement. “It is the ...

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Changing Behaviours is Key To a Low-Carbon Future - Milken Panel

Le contenu de cet article sera accessible en français à une date ultérieure. Restez à l’affût!  Over the last 18 months, increasingly more companies and governments have come to realize that the global economy must become more sustainable or risk an environmental-related collapse. That was just one of the key takeaways from an Oct. 18  Milken Global Institute Conference panel on Investing in a Sustainable Business Transition that featured Dan Barclay, CEO and Group Head at BMO Capital Markets, Jorge Mesquita, CEO, Blue Triton Brands, Hiromichi Mizuno, Special Envoy of U.N. Secretary-General on Innovative Finance and Sustainable Investments – Special Advisor, Milken Institute, Anthony Pratt, Executive Chairman, Visy Industries and Executive Chairman, Pratt Industries, and Shally Shanker, founder and managing partner, AiiM Partners. The hour-long panel, moderated by Milken Institute Senior Director, Innovative Finance, Caitlin MacLean, saw global experts drill down on how stakeholders ranging from investors to consumers, employees and suppliers must play a fundamental role in a successful transition to a low carbon economy. Hiromichi Mizuno thinks the move to a more sustainable economy is less of a transition and more of a revolution. He equates what he calls the “sustainability revolution” to the industrial revolution in that for change to occur everyone will need to think and act differently. Similarly, during the industrial revolution, the financial industry didn’t sit on the sidelines – they helped accelerate change. That’s what must happen today, too. “Now everyone says we do ESG or we take sustainability into account in our business or our financial decision making, but when will we see enough action? That’s the question,” said Mizuno. Companies and governments must do more now, he added. The world is at a critical juncture, and there’s no time like the present to begin that transition. “In years from now, we will reflect on 2021 and on whether we succeeded in changing the course of our society or economy, or we failed,” he told the Milken panel. Dan Barclay, CEO of BMO Capital Markets, agreed, calling 2021 an inflection point around behaviour specifically. The business world, he noted, is shifting away from penalty and rules-based philosophies, where words like divestment and challenge were common, and more into a conscious conversation about transition. Rather than a company getting punished for not being sustainable, they’re now being incentivized – through higher profits, cash flows, consumer attention – to embrace new environmental and carbon-cutting standards. “When you think about doing the right thing for the environment, you’re now creating an opportunity set where the company makes more money and that’s driving a behaviour change,” Barclay said. “It’s a virtuous circle of good – good for the environment, good for the company, good for their investors. When I see the right behaviours, I know the right outcomes will follow.” Embrace sustainable finance Sustainable finance is one tool that’s incentivizing companies to transition, said Barclay. For instance, in 2019, a Canadian meat plant became the first company in Canada to secure a sustainability linked loan. The interest rate on that loan would drop as certain sustainability targets – such as lower methane emissions or improved operations – were met. Canada was also home to the first North American energy company to secure a sustainable loan, which tied its rates into emissions reductions, improved gender diversity in the workforce and more gender diversity on the board. “When you think about these companies, they were willing to make public pronouncements about the change of behaviours,” he said. “Then the banks came in and said if you deliver on your targets you’ll have cheaper financing. It’s not materially cheaper, but it is a set of intents to actually change behavior. And to me (those are) great examples of people who said, ‘I’m going to be different, I’m going to change.’” Adopt new technologies Anthony Pratt, executive chairman of Pratt Industries, which creates sustainable paper packaging, said that tech is also key to combatting climate change. Years ago, his firm developed a technology that turned waste into cardboard boxes. At the time, companies were cutting down trees to create boxes. “If we hadn’t kept relentlessly reducing our cost position, we never would have revolutionized sustainability in our industry,” he explained. Pratt also stressed the importance of transitioning coal communities in the Midwest to green industry jobs. His own paper mills, he said, serve as an example of how that can be done. A number of innovative companies are finding solutions to sustainability challenges, but can they manage to stay afloat long enough to become profitable? That’s the question panel host Caitlin MacLean posed to Shally Shanker, founder and managing partner at AiiM Partners, who posited, “the missing middle continues to be a place where capital and resources are missing, and there's an opportunity for returns. I wish [investors] would come in sooner and help these companies scale a little bit faster. But the capital is there at the sidelines, so we do hope that more capital moves from sidelines to the mainstream.” Focus on specific ESG areas Jorge Mesquita, CEO of BlueTriton Brands, a company that produces and sells bottled water, among other beverages, said it’s important to focus on a few key ESG areas rather than try and tackle every aspect of sustainability. For instance, BlueTriton Brands wants all of its water bottles to come from recycled plastic by the end of the decade, which he says will require new technologies and “transformational innovation.” It’s also focused on improving the standard of water sourcing and it’s working with geologists and hydrogeologists to ensure they’re sourcing water responsibly. It also wants to have 80% of its transportation fleet using alternative fuels by 2030. “Those are the areas that matter most to our consumers,” he said. “I believe by focusing we can really make a lot more progress.” Mizuno wants business leaders to take that even further and commit their organizations to reaching net-zero emissions by 2050. That’s not only the right thing to do, but it will help capital markets improve the way they price assets. “Capital markets have really struggled to price all these things into today's market because we haven't agreed that the base case scenario is going to be net zero,” he said. “Without the consensus on the base case trajectory to net zero, we won't be able to price investments properly.” Make use of data Companies will really start to transition once they get better data from their business, added Barclay. While ESG standardization will help, companies must invest in data collection; for example, when companies know how their equipment is operating, the kinds of emissions they’re producing and how their supply chain is contributing to their carbon footprint, then they can change. “Once you have data and information you can actually plan to change, and I’ve seen it time and time again when you have information you didn’t have before,” he explained. “That is what gives me optimism, that the cycle of generating reliable, consistent and comparable data across systems is really starting to accelerate. And the more we have, the faster we can change.” Soon enough, the gap between what investors want versus what environmental activists are calling for is narrowing because more people care about a company’s value to society. “Everything is more integrated and it’s actually merging into the one core value, which is: value to the society and value to the system,” said Mizuno. Barclay agreed. “Once upon a time the corporate purpose was to drive the most value for the shareholders. I don’t know many corporations where that’s how they define themselves today. BMO’s purpose is to boldly grow the good in business and in life – that doesn’t sound like a bank, but we have to deliver as an institution in our communities.”

Le Sustainable Innovation Forum

  Des délégués de près de 200 nations arriveront bientôt à Glasgow pour la 26e Conférence des Nations Unies sur les changements climatiques (COP26), avec pour mission de parvenir à des accords concrets qui nous mèneront véritablement vers un monde carboneutre. À l’occasion de la COP26, BMO participera au Sustainable Innovation Forum (SIF). Cet événement hybride se déroule du 8 au 10 novembre, en parallèle à l’une des plus importantes conférences des Nations Unies sur le climat de notre époque. Pendant trois jours, les leaders d’opinion disposeront d’une plateforme pour débattre de leur rôle dans la transition vers la carboneutralité. J’espère que vous pourrez vous joindre à moi et aux délégués de BMO Marchés des capitaux, de BMO Gestion mondiale d’actifs et du tout nouvel Institut pour le climat de BMO, qui fera ses débuts sur la scène publique en s’adressant aux participants par vidéo. Vous pouvez vous inscrire pour y assister virtuellement ici. À BMO Groupe financier, nous sommes déterminés à tenir le rôle de principal partenaire de nos clients dans la transition économique vers un avenir durable en favorisant la valeur et la croissance à long terme, grâce à notre ambition climatique et à notre engagement à nous joindre à l’alliance bancaire Net Zéro (NZBA). C’est le début d’une nouvelle révolution, dans l’innovation, dans la technologie et dans la façon dont le monde fonctionnera, et nous nous engageons à prendre une part active au cheminement qui s’inscrit parfaitement dans notre vision d’avoir le cran de faire une différence dans la vie comme dans les affaires.

Le Sustainable Innovation Forum

Dan Barclay | octobre 25, 2021 | Finance durable

Five Challenges For Net Zero Investing

  Disponible en anglais seulement The Intergovernmental Panel on Climate Change gave the world a stark warning in 2018 of the dangers of failing to limit the global temperature rise from climate change to 1.5 degrees. This year has seen some of the physical impacts of climate change emerge even sooner than many scientists had predicted – including deadly flooding in Europe and China, and the North American ‘heat dome’ that triggered widespread wildfires. In the run-up to the rescheduled COP26 climate negotiations, we have seen momentum gather behind the ambition of ‘net zero’ greenhouse gas emissions by 2050, consistent with a 1.5 degree trajectory. Over 3,000 businesses are now committed, as well as many of the world’s major governments. The investor community Overview has joined the push, via initiatives including the Net Zero Asset Managers Initiative – which BMO Global Asset Management supported as a founder signatory – and the Net Zero Asset Owner Alliance. We have been working on how to fulfil our commitment, and contributing to industry knowledge on net zero investing, particularly through co-chairing the Implementation Working Group for the Net Zero Investment Framework. We have also been discussing our progress with clients, as the net zero journey needs to be a partnership between asset owners and managers. Reaching net zero is critically important, but it is not easy. Here we set out five challenges we have identified so far as we move from commitment to implementation. Challenge 1: Selecting a methodology There is no single ‘net zero investing’ methodology. Several approaches have been developed by different groups. In our view, this is a healthy reflection of innovative activity on an issue that has emerged incredibly rapidly, almost from a standing start barely a year ago – but it does create the potential for confusion. Approaches include: The Net Zero Investment Framework, part of the Paris Aligned Investment Initiative The Asset Owner Alliance Target-Setting Protocol, developed by the UN convened Asset Owner Alliance The Science-based Targets Initiative, which has a methodology for financial institutions The EU Paris-Aligned and Transition Benchmarks A variety of commercial methodologies from ESG data providers Most recently, a consultation paper on portfolio alignment from the Task Force on Climate-related Financial Disclosures Our own approach is based on the Net Zero Investment Framework, which we helped to develop. It is worth noting, though, that there are many common elements between the approaches mentioned above. In March 2021, we set out our principles for net zero investing. One of these was around transparency. We have therefore been cautious, so far, of temperature alignment portfolio measures. Whilst robust in theory, temperature alignment metrics can in practice can be a ‘black box’, with multiple assumptions driving the outcome, which are not easy to unpick and understand. Our preference is for a dashboard approach, providing multiple metrics, which can better capture the inherent complexity of the net zero transition. Challenge 2: Avoiding perverse incentives A concern with emissions targets of any kind is that they can encourage decisions that are aimed just at meeting the target, rather than achieving real-world emissions reductions. This risk exists both for companies and for investors. Through our engagement we have spoken to several companies who, conscious of the intense investor focus on climate change, are wrestling with the choice of whether to invest in carbon reduction technologies for their high-emissions activities – or whether to divest them, which would immediately improve their emissions profile, but result in those emissions transferring to another owner, who might not be as ethically minded or not as transparent (for instance, by going private). A similar dilemma could present itself to a fund manager with a portfolio-level emissions target to meet. A simple sector reallocation from, say, electric utilities to service industries could achieve the target at the push of a button. But engaging those electric utilities to cut their emissions, and achieving the portfolio target as these cuts are implemented, would have a greater positive impact on the climate. The answer to this dilemma lies, in part, in what metrics we bring into the analysis. In line with the recommendations of the Net Zero Investment Framework, as well as looking at portfolio-level financed emissions, we are also looking to analyze ‘forward-looking metrics’ – in other words, assessing the performance of individual portfolio companies over time in aligning with a net zero emissions trajectory. This will enable us to understand the extent to which of our portfolio companies are net zero aligned, and give us the confidence to continue to hold companies in higher-emissions sectors, if that makes sense from a financial point of view – as long as they are on the right pathway to reduce their impact. It will also allow us to target misaligned companies and use stewardship to encourage them to improve – with a clear message that companies which continue to be misaligned ultimately do not belong in net zero portfolios. By combining analysis at the company level, together with the objective of cutting emissions at the portfolio level, we believe we can create a richer set of data. This will enable our fund managers to decarbonize their investments in the way that makes sense from both a financial and a climate point of view. Challenge 3: Dealing with data gaps While the use of forward-looking, company-specific data points helps provide a more meaningful analysis of net zero alignment, the approach carries significant challenges in terms of data. The good news is that nearly 160 of the world’s largest corporate emitters – covering around 80% of industrial greenhouse gas emissions – have been systematically scored on their climate performance using the Climate Action 100+ benchmark. But for other companies, data provision is patchier. We have drawn information from sources including the Transition Pathway Initiative, Carbon Disclosure Project (CDP) and Science-based Targets Initiative, as well as our ESG data provider MSCI. However, corporate disclosure even of simple metrics such as Scope 1 and 2 emissions is not universal, and disclosure of more sophisticated data such as Scope 3 value chain emissions is very partial and often involves estimation. We are working with peers to improve this, such as through collaborative engagement organized by the CDP targeting non-disclosers. We do expect data provision to improve, but this will take time. The challenge is greater for some sectors than others. Many of our strategies have a heavy exposure to financial institutions, such as banks and insurers, where climate risks come not from direct emissions, but from their loan books or their exposure to insured assets. Reliable, comparable data on financed emissions is not yet available. Instead we are looking at more qualitative indicators, such as the integration of climate factors into lending decisions. Challenge 4: Account for solutions providers Many companies involved in the manufacture of emissions-savings technologies may have a significant carbon footprint of their own, as compared with some other sectors – but looking just at these direct emissions does not capture the emissions savings they create though their products. Again, we wish to avoid disincentivizing investment in these firms, as we know there is an urgent need to shift capital toward climate solutions. We see it as vital to highlight investment in solutions as an integral part of a net zero approach. This is something we have already been doing in our Impact Reports for our Responsible and Sustainable funds, where we link company revenues to the Sustainable Development Goals, including SDG7 – Affordable and Clean Energy. The Net Zero Investment Framework recommends measuring and monitoring investment in solutions, using metrics such as alignment with the EU Taxonomy, which provides definitions of ‘green’ activities. Some companies have started to report data on ‘avoided emissions’ – in other words, emissions that are avoided by using a company’s products, as compared with other products in the market. This type of data would allow us to quantify some of the benefits these companies bring. Challenge 5: Expanding to all asset classes The commitments made by investors, including BMO GAM, under the Net Zero Asset Managers Initiative mean transitioning all our assets under management to net zero emissions by 2050. However, while methodologies are becoming increasingly available for some asset classes, notably equities, credit and direct real estate, they are significantly less mature for others. We would particularly highlight: Sovereign debt: The Net Zero Investment Framework sets out a broad structure for sovereign debt net zero alignment, but data sources on the alignment of government policies with net zero are not yet comprehensive, and there is not yet a systematic structure for organizing investor engagement with governments. The ASCOR project (Assessing Sovereign Climate-related Opportunities and Risks) is an important initiative that is working to address these issues. This is an urgent area to make further progress, given the significance of sovereign debt in many asset owner portfolios. Private equity: In principle, the same approach on net zero alignment should apply to companies in private hands as for publicly listed companies, but the lack of reported data presents a significant challenge. Work is underway by the Institutional Investors Group on Climate Change to determine how to bring this asset class up to the same standards. Multi-manager funds: Converting a multi manager strategy to a net zero pathway means collecting information and data from underlying fund managers – which, given the range of methodologies being used, may be difficult to aggregate. Work is underway to tackle methodology gaps, but it may be that some asset classes need to adopt a net zero approach somewhat later than others. Final thoughts While the road to net zero may seem daunting for investors, the work being done by individual investors and through collaboration is rapidly making progress. Being open about the challenges and limitations of the methodologies we use is essential in terms of communicating honestly with clients and other stakeholders, as well as identifying the areas where further work is needed. We see many opportunities arising from the rapid growth in investor commitment. The analysis of net zero alignment will support the deeper integration of climate risks and opportunities into investment portfolios, through the use of new data sets and analytical techniques. The emphasis on engagement coming out of the methodologies so far developed will add further impetus to investor stewardship, particularly beyond the Climate Action 100+ companies already under intensive focus. And efforts to address data gaps should support better company disclosure, building on progress made by the Task Force on Climate-related Financial Disclosures. Implementing net zero is a huge challenge. But it’s also an exciting new journey for all of us. Being frank about the difficulties we encounter will add to credibility and consistency across the industry. It’s critical we get this right, and fast.   Visit BMO Global Asset Management to learn more.   Disclaimers Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned. The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time. BMO Global Asset Management’s voting, engagement and public policy work is conducted independently of the wider BMO Financial Group. Positions taken by BMO Global Asset Management may not be representative of the views of the BMO Financial Group as a whole or of the other lines of business.

Five Challenges For Net Zero Investing

octobre 22, 2021 | Finance durable