Global interest in ESG investing is picking up, if sustainable-investing assets invested are any indication. But because of the variations in criteria used to define “good” investments, investors who want to enter the space may find themselves at a loss over what causes they should put expect asset managers to get behind.
Those who are looking for a shortlist may want to consider five themes identified by BMO Global Asset Management [BMO GAM] in a recent note. “Our 2019 priorities have been chosen on the basis that they meet both these objectives: that all five are material to investors and of critical importance to the SDGs [Sustainable Development Goals],” it said.
Stressing its commitment to engage with companies on its priorities, BMO GAM noted the urgent need to protect vulnerable workers. Inadequate wages, weak safety practices, and modern slavery all undermine SDG 1 and SDG 8, which call for an end to global poverty and urge safe working practices.
“In 2019, we will continue to engage companies on how they are tackling modern slavery practices such as forced and child labor within their supply chains,” the firm said. It vowed to follow up on previous efforts involving living wages, specifically in the retail sector where allegations of poor staff treatment can heavily impact share prices. The potential impact off apparel sourcing practices on local populations and the environment, BMO GAM added, will also be addressed.
“The world remains a long way from achieving the targets set under SDG5 – gender equality,” it continued. While it acknowledged the intensive focus and small wins in board-level diversity, the firm said it will look more deeply at representation of women at senior-management level and below, focusing on identifying barriers and encouraging best practices in areas including mentoring, flexible work hours, and pay.
Another issue that it vowed to address is climate change. In line with SDG13, which calls for climate action including targets for climate finance, the firm said it will engage with Southeast Asian banks that have been generally slow to act on climate change but are highly exposed to the associated risks, and may be missing opportunities to finance solutions.
“We also plan to initiate a dialogue with the marine transportation sector, which we believe has so far been under-engaged by investors, despite accounting for approximately 2% of global greenhouse gas emissions,” it said.
SDG 66 and SDG 14.15 — which concern underwater life and companies’ water use, respectively — are another point of concern. With the rise in awareness of the impact of plastic waste in 2018, the firm said it will engage with food & beverage companies, among others, to learn how they are responding and proactively encourage opportunities to use more sustainable packaging and phase out single-use plastics. “[C]ompanies in water-intensive sectors need to factor in water planning as an integrated part of their business risk analysis,” BMO GAM added.
Finally, the note pointed to the global health threat represented by antimicrobial resistance (AMR) among serious infectious agents, which has risen in part due to the misuse of antibiotics.
“We intend to focus our engagement on pharmaceutical companies, companies involved in meat and/or dairy production and food retailers,” it said. “These companies can play a pivotal role in slowing down the development and spread of AMR.”
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