Can you give a brief overview of your strategy in terms of what you are trying to achieve for investors, your investment process and the make-up of the investment team?
Launched in 1987, the BMO Responsible Global Equity fund aims to provide capital growth while driving positive change in society and the environment. We orientate investment decisions around our Avoid, Invest, Improve philosophy, which underpins all our ESG-focused offerings. Quite simply this means we exclude companies perceived harmful to people and the planet; harness long-term sustainable opportunities by investing in companies we perceive as market leaders within several megatrends such as energy transition and health & wellbeing; and use our position of influence to engage with companies around improving their management of ESG issues, and exercising our voting rights where necessary to drive further positive change.
It's not enough to state our ambition of doing good - we need to monitor and measure the impact of our investments. Each year we publish an impact report for the fund, to provide analysis on how the products and services provided by companies we invest in for this portfolio align with the sustainable development goals (SDGs) - both positively and negatively; key portfolio impact metrics on carbon, water and gender; and a summary of our engagement with portfolio companies, and how this aligned with the SDGs.
Our Global Equities team is responsible for stock picking and day-to-day portfolio management. We draw on BMO Global Asset Management's entire active equities expertise, including specialists in developed and emerging markets. Throughout the process, we work alongside our Responsible Investment team - 21 sustainability experts with 275 years of collective experience - to ensure that ESG-related factors are hardwired into our company analysis and engagement.
Can you identify a couple of key investment opportunities for your fund you are playing at the moment in the portfolio? This could be at a stock, sector or thematic level
As governments and companies gear up to achieve the Paris Climate Agreement goals, we see growing opportunities within the energy transition space - the pathway towards transforming the way we generate and use energy. That means a shift from fossil-fuels to zero-carbon sources, and increasing the efficiency with which energy is used.
Transport is another key part of this transition. With the cost of rechargeable batteries falling, companies and consumers are increasingly turning to electrification for transportation, making the transition to electric vehicles one of the largest potential areas for electrification. Companies providing battery materials are one area we have focused on - for example, we believe Belgium's Umicore looks well placed for the structural change towards electric vehicles.
Until all electricity is completely decarbonised, improving the rate of energy efficiency remains critical to tackling climate change. We therefore also see opportunities in industrial gas companies, which can help global industrial customers reduce emissions. Linde work with their customer base to reduce aggregate carbon emissions through a more efficient production process. They are also part of the energy transition drive, through the production of hydrogen as an alternative zero-carbon fuel source powering end markets, from building heat and power to transportation.
How have you been trying to weather the storm caused by the Covid-19 pandemic and what could be the longer-term implications for your strategy?
No one could have predicted the impact borne on society and the economy by Covid-19. That said, our natural long-term bias towards quality businesses with strong competitive positioning, strong balance sheets and high visibility of earnings stood the portfolio in good stead through 2020.
We believe that potential outperformance over the long term is to be found not simply in companies addressing sustainability challenges, but from those high-quality businesses addressing sustainability challenges: those with strong competitive positioning are able to consistently capitalise upon those opportunities, rather than see their market leadership dissipate through increasing competition. Our focus on quality helped drive relative outperformance last year, as these companies garnered increased investor attention as market participants anchored to those best positioned to weather the uncertainty.
Looking forward, whilst in the short term we are witnessing a value rotation as investors look to profit from the ‘reopen' trade, we remain focused on the longer term. Covid-19 has brought sustainability challenges to the fore - not just environmental, but societal too, from physical health, labour standards, and mental wellbeing. It will take time for these challenges to be addressed, but over the long term, the opportunities should create a robust risk/reward payoff.
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