Stockholm (NordSIP) – BMO Global Asset Management, the global investment manager with US$230 billion in AUM, announced Monday that all the funds within its UK Responsible Funds range are to completely divest shares from fossil fuel companies, multiple sources report.
These responsible funds – previously known as “stewardship” funds, the first ethical funds in the UK – manage roughly US$1.95 billion, and will divest US$26 million (GBP 20 million) from all companies holding oil, gas or coal reserves. Divestment will take place immediately for BMO’s Global and Emerging Market strategies, which will extend to shares in Anglo-Australian mining giant BHP Billiton, with BMO’s three remaining UK-based funds divesting 99.5% of holdings in fossil fuel companies by January 1, 2020.
The move represents one of the biggest climate change-related divestments so far. Over $5 trillion in institutional funds, such as pension funds, have divestment strategies in place, with investment funds being compelled by investors and activists to follow suit.
“If all current known reserves are extracted and burnt, we know that the world would not meet the 2 degrees temperature limit established under the Paris Agreement,” said BMO director Vicki Bakshi. “As such, we have come to the view that investment in companies with fossil fuel reserves is increasingly incompatible with the ethical and sustainability objectives of the responsible strategies range that we run.” Ms Bakshi added BMO intends to use its voice to encourage companies and policymakers to adopt strategies in order to make the transition to a low-carbon global economy.
The decision comes on the heels of increasing demand for strategies that allow investors to avoid companies that contribute significantly to climate change, and was influenced by the Archbishop of Canterbury, Justin Welby, who is president of BMO’s responsible investment council.
“This policy is a most impressive piece of work and puts BMO Global Asset Management in the front line as a leader on the issue of climate change,” the Most Revd Justin Welby said. “BMO Global Asset Management’s Responsible Funds range has a set of ethical and sustainability criteria governing which companies the strategies can invest in. These criteria are set by the Governance and Sustainable Investment team.”
The Church of England sold its holdings in companies making more than 10% of revenues from thermal coal and oil from tar sands, two of the most polluting fossil fuels, in 2015.
It is estimated that the world can afford to burn no more than between one-fifth and one-third of proven fossil fuel reserves to stay below the 2ºC of global warming considered to be the tipping point beyond which climate change may become irreversible. Last year was about 1.1 degrees Celsius above pre-industrial levels, according to NASA and the Met Office, and was the hottest on record for the third year in a row.
One-third of UK investors say they would like fossil-free options for their savings.
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