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ESG Themes
Your Clients Are
Talking About

Nalini Feuilloley, Director, Responsible Investment Team, BMO Global Asset Management, shares her expert insights on big ESG themes hitting the mainstream, and what you can do to engage in the right conversations to achieve better outcomes and stronger relationships.

May 2021

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Nalini Feuilloley

Director, Responsible Investment Team

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Nalini Feuilloley, Director, Responsible Investment Team, BMO Global Asset Management, shares her expert insights on big ESG themes hitting the mainstream, and what you can do to engage in the right conversations to achieve better outcomes and stronger relationships.

As environmental, social and governance (ESG) considerations become increasingly relevant in the post-COVID era, developing an understanding of the main themes that are ever more prevalent in client conversations today is essential. Knowing the responsible investing (RI) jargon is table stakes nowadays, but it’s also about facilitating a meaningful two-way dialogue and then having the insight to educate and recommend appropriate strategies for your interested clients.

To accomplish this, it’s key to realize the connection between individual concerns, and portfolio risks, because then you can make a valid case as to why clients should invest with managers who understand how to mitigate these issues.

So, what themes should be on your radar? To get you started, here’s a shortlist of topics to help guide your ESG education.

It’s key to realize the connection between individual concerns, and portfolio risks.

Three expansive themes people are talking about

1. Climate change and environmental stewardship

Climate change continues to be the number one existential crisis of our generation. The topic has permeated down to clients because it’s constantly addressed in the news, social media and mainstream content, such as David Attenborough’s new documentary on Netflix. Investors – from institutional to retail – want to know what they can do to help to achieve the transition to net-zero emissions by 2050. They’re asking, how can we ensure our money is supporting this transition to a low carbon economy as opposed to perpetuating the issue?

From biodiversity loss and safe water drinking to ocean plastics, environmental stewardship in general is becoming more tangible to clients now, and future generations.

In fact, in a pre-pandemic survey of 2,000 North Americans, conducted by BMO Global Asset Management, 58% of respondents said making drinking water safe and available was the number one fund theme they were likely to invest in.1 This was quickly followed by creating renewable energy sources to replace traditional fossil fuels.

2. Labour standards

Meanwhile, the pandemic has shone a bright light on human capital management – everything from workplace safety to living wage to unpaid sick days. Many are now digging deeper and asking: are essential workers adequately protected in terms of their ability to keep their distance if required? While many employees have been able to work remotely, this isn’t a viable option for others. So, creating tools to safeguard workers has been a hot topic this past year, and many clients want to know what progress companies are making on this front, and how they can invest in ones that are making a strong impact.

Importantly, expectations here are continually evolving so consider keeping a close eye on these issues, since many of these have been problematic for sometime but have only recently come to light during the global pandemic.

3. Diversity and inclusion

Another related issue that is hitting close to home now for many investors is diversity and inclusion, and expanding the topic beyond gender to all underrepresented groups – from LGBTQ to Indigenous communities. Since the murder of George Floyd in 2020, and the subsequent anti-racism protests worldwide, social justice has risen to the top of investors’ minds – and corporate agendas. Companies have had to shift and mobilize, from providing data disclosure on diversity, to setting measurable goals and policies for representation across their entire workforce. At BMO Global Asset Management, some of our current expectations as an asset manager include making a public commitment at leadership level to a diverse workforce, and explaining the link to overall company strategy.

The pandemic has shone a bright light on human capital management – everything from workplace safety to living wage to unpaid sick days.

MyESGTM: Assess, engage and align client interests

To integrate these broader themes and engage in deeper, quality conversations, BMO Global Asset Management has developed the digital MyESGTM quiz, which allows Advisors to better achieve ESG objectives for clients by tuning into investors’ unique personas. Based on proprietary research, the tool works on the concept that ESG investing encompasses a wide spectrum of beliefs and preferences – that there is no “one size fits all” discussion, and that it doesn’t only appeal to one specific personality type.

Requiring just 2 minutes of a client’s time, the quiz yields insightful information on their ESG values, drawn from statistical analysis on investor beliefs and behaviours. Together with our Quick Start Guide to the ESG Advisor Toolkit and Discussion Guide, these practical resources help to segment your clients, and frame conversations accordingly, with relevant talking points, cues, power tips and FAQ answers. Ultimately, the customized approach allows clients to invest based on their own ideals and beliefs – and makes it easier for you to align their interests with appropriate investments. It’s also an innovative way for you to proactively introduce ESG if it hasn’t come up already, versus reacting to inquiries which are bound to arise in short order.

The customized approach allows clients to invest in what they believe in – and makes it easier for you to connect their interests with appropriate investments.

ESG at US$53 trillion by 2025

Many investment professionals have already enhanced their RI education through courses and designations offered through the Responsible Investment Association (RIA), given that sustainability is much more important to clients today than even a few years ago. And we think that trajectory will continue, as more research is published showing the correlation between ESG considerations and favourable performance. Case in point: 78% of investors are already investing in ESG strategies, or are very receptive, a number which will likely increase further as wealth is transferred to the next generation2. Global sustainable assets are on track to exceed US$53 trillion by 2025 (up from $37.8 trillion by year-end), representing more than a third of the projected total assets under management3. It’s clear that RI is no longer a niche, and so becoming ESG conversant is another way to add value for current clients – and will ensure you stay relevant going forward.

ESG Solutions for Every Portfolio

As part of our commitment to align personal values with investments, BMO Global Asset Management offers an entire suite of innovative ESG strategies to suit your client’s unique needs, across both equities and fixed income, active and passive. From BMO Sustainable Opportunities Canadian Equity Fund to BMO Women in Leadership Fund, to a range of dedicated ESG ETFs, we cater to investor appetite with the opportunity to use solutions hand-in-hand to create an entire RI portfolio, or as satellites if appropriate.

For other ESG tools to enrich your practice, or to learn more about our expansive suite of RI strategies, contact your BMO Global Asset Management Regional Sales Representative.

1 BMO Global Asset Management, 2019.

2 Ibid.

3 Bloomberg Intelligence, February 23, 2021.

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MyESGTM is intended for educational purposes only and should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional. The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual security. Please speak with your investment professional to determine the solution that best meets your individual investment needs and circumstances.

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BMO Mutual Funds are managed by BMO Investments Inc., which is an investment fund manager and a separate legal entity from Bank of Montreal.

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BMO Global Asset Management is the brand name for various affiliated entities of BMO Financial Group that provide investment management, and trust and custody services. BMO Global Asset Management comprises BMO Asset Management Inc., BMO Investments Inc., BMO Asset Management Corp., BMO Asset Management Limited and BMO’s specialized investment management firms. Certain of the products and services offered under the brand name, BMO Global Asset Management are designed specifically for various categories of investors in a number of different countries and regions and may not be available to all investors. Products and services are only offered to such investors in those countries and regions in accordance with applicable laws and regulations. BMO Financial Group is a service mark of Bank of Montreal (BMO).

BMO ETFs are managed and administered by BMO Asset Management Inc., an investment fund manager and portfolio manager and separate legal entity from Bank of Montreal. Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the prospectus before investing.

Exchange traded funds are not guaranteed, their values change frequently and past performance may not be repeated.

BMO Mutual Funds are managed by BMO Investments Inc., which is an investment fund manager and a separate legal entity from Bank of Montreal.

Commissions, trailing commissions (if applicable), management fees and expenses all may be associated with mutual fund investments. Please read the ETF facts, fund facts or prospectus of the relevant mutual fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

For a summary of the risks of an investment in the BMO Mutual Funds, please see the specific risks set out in the prospectus. ETF Series of the BMO Mutual Funds trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.

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