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Partnership for a Net Zero World

 

As BMO Financial Group announced its ambition to achieve net zero financed emissions in its lending by 2050, the bank hosted a virtual event with clients to discuss how the transition will be a driving force behind BMO’s purpose going forward, and to explain why clients are critically central to that.


Listen to the full discussion on Sustainability Leaders podcast.


TRANSCRIPT

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“Helping our clients adapt and thrive through this transition requires a thoughtful, balanced and accelerated approach, informed by science, common sense and bold but practical solutions,” said BMO Chief Executive Officer Darryl White, laying out plans that will also see BMO launch the BMO Climate Institute and increase its commitment to sustainable finance.

“Our clients are ready to act, but many, especially smaller and medium sized companies, are seeking advice and expertise to inform their response,” said White. “Within this challenge is an opportunity for BMO to make a difference, to help our customers and to drive long-term value and growth at the same time. And so, our ambition is clear: to be our clients' lead partner in the transition to a Net-Zero World.”

Not Either/Or

Critically, White said BMO’s net zero ambition is one that does not envision an either/or world, but rather one that is sustainable, meeting the energy and economic needs of today while also making the investments needed to foster the low-carbon economy of the future.

Chief Strategy and Operations Officer Cam Fowler said banks will have a critical role to play in the global transition to net zero, particularly in four key areas: facilitating financing in the reduction in CO2 equivalent emissions; intermediation of risk and leadership toward more sustainable corporate practices; solving for challenges like simplifying and aligning standards and reporting; and acting as role models in sustainability by pursuing reductions in operations emissions and offsetting emissions via carbon credits and renewable energy.

“A significant amount of capital will be required to finance the transition, and this also creates an opportunity to grow our business,” added BMO General Counsel Sharon Haward-Laird. “BMO wants to be there to work with our clients on this opportunity while boldly growing the good in business and in life. We are committed to helping our clients adapt to climate change impacts and contribute to the transition to a net zero global economy with tailored products, services and solutions.”

In Conversation – Experts Panel

Immediately following the announcement, the bank hosted a panel of internal and external experts to drill down further on the implications of BMO’s net zero ambitions, its plans to mobilize capital toward sustainability and associated plans to create the BMO Climate Institute.

Hosted by BMO Chief Sustainability Officer Michael Torrance, the panel included BMO experts BMO Financial Group, Chief Executive Officer, Darryl White, and Global Asset Management, Head and CEO, Kristi Mitchem; with external partners Dr. Sean Cleary, Executive Director, Institute for Sustainable Finance, Queen’s University;, and Eric Usher, Head, UN Environment Programme, Finance Initiative.

Aligning Goals: All About Ambition

For Eric Usher, BMO’s net zero ambition – and in particular its client focus – is key to financial sector alignment with climate and ESG goals.

“I think, as we've heard from all of you in different ways, this really is about ambition,” he said via virtual conference. “This is about the role of the finance sector and the role of a finance leader like BMO leaning in and helping clients actually go towards this new transition, rather than standing back.”

He referred specifically to BMO’s holistic ambition to target net zero financed emissions in its lending by 2050.

“It doesn't make much sense to make a big deal out of your most recent green bond if you can't start to talk about the greenness of the entire fixed income bond portfolio and all of your activities. And this is the type of positioning you're looking at now.”

The modern age of sustainable finance started in 2007, with the landmark Freshfields Report, and since then it has evolved from a “could” to a “should” to a “must” in many jurisdictions. Usher noted that Canada is no stranger to the global climate change discussion, pointing to Canadian Mark Carney’s speech to Lloyds of London in 2015, Breaking the Tragedy of the Horizon, about the impact of climate change on financial stability, as a key driver in the financial sector’s shift in attitude.

A further inflection point came later in 2015, when 195 governments signed the UN Sustainable Development Goals and the Paris Agreement, establishing a compass for the direction society needs to move toward.

This shifted the discussion from one of managing risks, to managing risks and understanding opportunity, he said, adding that, “It's only been in the last year or so that we've come to this more talking about the notion of alignment of the entire portfolio.”

Opportunity and Alignment Framework

The idea of alignment, according to Usher, gathered steam with the UN Principles for Responsible Banking, which were drafted in 2019 and created a framework for aligning financing with the needs of society.

“So, it's not necessarily a risk framework, it's an opportunity and alignment framework,” Usher said. “And I have to congratulate BMO, you were actually the second of the 10 largest banks in North America to sign it.”

“Therefore, I think your references around the need to work with clients to navigate this transition is critical to the future of the finance sector,” he said.

The Role of Institutional Investors

Kristi Mitchem, CEO and Head, BMO Global Asset Management, told the panel that investors now list climate change and climate action as their number one area of concern, reflecting the systemic nature of the climate problem.

“It touches every company in every sector, in every industry, in every country around the world,” said Mitchem.

Clients, she said, are looking at climate change from three perspectives, starting with a need to fully understand their exposure, not just in terms of high-level statistics on the carbon footprint of their portfolio, but in being able to quantify and assess the risks around their exposure to carbon-intensive industries and companies. Secondly, Mitchem said, investors are keen to drive capital towards progress.

“They want to be investing in companies which are actually making a difference in not just how we're transitioning, but how quickly we're transitioning.”

Finally, she said clients are eager to be heard. Recognizing that they have an important role to play because of their ownership stakes, “they want to see companies engage with them, and they want to work with those companies to really make improvements.”

Multidisciplinary Push for a Sustainable Economy

Actions like the those announced by BMO this week help drive society to come together in the fight against climate change, harnessing the collective expertise of scientists, environmentalists, sustainability experts, and finance professionals, said panelist Dr. Sean Cleary, Executive Director of the Institute for Sustainable Finance (ISF) at Queens University

Dr. Cleary compared recent cooperation on climate change and climate action to what we saw in recent years in FinTech and AI, where the industry responded to a need to change across its knowledge and research base.

“It feels like this transformation where we're cramming all these people from these different areas into the same room, it used to be kicking and screaming,” said Dr. Cleary. “And now it seems like everyone is jumping into the room of their own volition. We have the scientists jumping into those rooms, we have environmentalists, we have sustainable people who are experts on sustainability considerations, and we have the finance people in there, too. And it's necessary.”

The BMO Climate Institute will be complementary to the work done at Queens’ ISF, he said, and perhaps serve to fill some of the information gaps and education gaps that need to be addressed.

“I think from our point of view, this multidisciplinary effort is very consistent with everything we need to do in terms of our research, education and our collaboration efforts.”

Net Zero and BMO’s Purpose – Hand in Glove

For BMO Chief Executive Officer Darryl White, BMO’s net zero ambition, its new climate institute and related goals around financing the transition to a lower-carbon economy, all go hand-in-glove with the bank’s purpose statement announced three years ago, to build and grow the good in business and in life.

A key action pillar at that time was to double the good for a sustainable future, and saw the bank set out clear objectives around mobilizing capital toward sustainable development through 2025.

“And what we've done since then is we've really blown through most of those goals on sustainable finance for 2025,” said White. “So we took the opportunity today to say, ‘all right, it's time to double-down on that and figure out how much more we can do and figure out how we can broaden the mandate, not just for ourselves but … how we can help define the path for our clients using analytics, using our work, using our advice.’”

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Darryl White Chief Executive Officer, BMO Financial Group



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