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Banking the Transition to a More Sustainable Future

Sustainable Finance November 29, 2019
Sustainable Finance November 29, 2019
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In addressing climate change, we face one of the greatest and most complex disruptions since the industrial revolution. For banking, it also represents an unprecedented opportunity. Banks are in a unique position to move beyond being providers of capital to being active conveners and catalysts for change.

The discourse around sustainability is currently broken, with the narrative polarized into either / or positions that are neither helpful nor conducive to the transition that is already underway.

As a third-generation Calgarian and proud citizen of Canada, North America and the world, I believe the industry, and in particular, the organization I work for is uniquely placed to help find solutions to this impasse. We can serve the needs of our clients, across industries, as well as work toward a more sustainable future. This is not a question of either / or, but rather of AND.

Nowhere is this more apparent than in the Canadian energy sector, a major producer of the world’s fossil fuels and home to many of our clients, which is in the global spotlight for its carbon footprint. The oil and gas industry and related services account for about 10% of Canada’s total real GDP. Across Canada, more than half a million people and their families rely on the industry either directly or indirectly for their livelihoods.

BMO is a proud partner to Canada’s energy sector. We have over two centuries of history and experience helping our energy clients, and we are committed to continuing our support.

The world will continue to consume oil and gas for decades to come, and as it transitions to a lower-carbon economy, it is imperative that responsibly-produced Canadian oil remains part of the global energy mix.

While some of our international competitors are divesting, we call for engagement. We believe the transition to a more sustainable future requires a far more comprehensive and sophisticated conversation – one that takes into account that the energy business is, and will continue to be, essential to this country’s economic well-being.

Responsible oil

Canada is among the most responsible of the world’s top-20 oil producing countries. Over issues ranging from environmental policy to social welfare and corporate governance, Canada tops global environmental, social and governance (ESG) scores, and is second overall next to Norway, a composite of ESG ratings shows. The sector ranks especially high in the “S” and the “G”, and to make the global case for Canadian oil even stronger, our oil sands producers are working tirelessly on the “E”, investing on average $1 billion a year (since 2012) in significant reductions in the intensity of greenhouse gas emissions as well as water and land use.

BMO will be with them every step of the way. Innovative companies and entrepreneurs in the energy business, with support from capital providers such as us, are in the best position to manage the energy transition required to combat climate change.

As independent investors, we recognize that we must also commit our own resources to the search for sustainable solutions.

As one of the first global supporters of the Financial Stability Board’s recommendations around climate-related risk and opportunity, we believe there is an opportunity to contribute to sustainable development AND smooth the transition to a lower-carbon economy, in a way that addresses climate goals and takes into account the socio-economic impacts and energy needs of today.

To achieve sustainability we need wins along the way – reducing emissions wherever and however we can at all phases of the transition. Banks have a unique role to play in these interim solutions, whether in energy, mining, real estate or industrial manufacturing, as we facilitate the movement of capital in all stages of the journey.

Business is uniquely positioned in society to facilitate this kind of positive change, which requires innovation, entrepreneurialism and access to capital.

Advise, partner, invest

As advisors, we must become advocates for companies embracing sustainable solutions that are synonymous with good business, regardless of sector, and cognizant of current socio-economic realities. A successful transition will see companies evolve as they pursue solutions, and create an incentive model that drives further adaptation. Businesses understand that climate change is a material concern and that the strategies they put in place today will determine their potential for long-term success.

Business woman in factory

As independent investors, we recognize that we must also commit our own resources to the search for sustainable solutions. Earlier this year, BMO pledged to mobilize $400 billion in sustainable finance by 2025, including $150 billion in financing for clients pursuing sustainable outcomes. This $150 billion will include bringing transition bonds to market, helping our clients finance the investments they need to make in their businesses to transition to a lower-carbon future. In October, BMO issued its inaugural U.S. $500 million, three-year sustainability bond as part of our commitment to sustainable finance. 

We will also invest in sustainable technologies alongside our clients. The $250 million impact fund we’re launching will see us partner with businesses to drive innovation that mitigates climate change, manages risk and embraces opportunities for growth.

Leveraging our role as a trusted advisor, BMO is developing new ways of working with clients to identify and implement sustainable, low-carbon solutions. We are delving deep into carbon capture technology that will be critical to energy companies’ strategies on transition. As large-scale energy storage becomes essential to power, utilities and infrastructure, we are developing parallel groups to work on that space, because we know it’s important to the companies we advise.

Over the course of our history, BMO has remained committed to its clients, and our commitment will never waiver, supporting them as they respond with innovation in periods of disruption.

Everybody has a part to play in the transition to a low carbon economy, and we are no exception. At BMO, we believe it is our responsibility to help our clients navigate change as the world works toward a sustainable future.

It’s time to shift the discourse around sustainability away from the either / or, and get to the AND – meeting the energy and economic needs of today and doing what it takes to create the low-carbon economy of the future.

The views and opinions expressed do not necessarily reflect the views or positions of BMO Financial Group and or its affiliates.

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Dan Barclay Chief Executive Officer, BMO Capital Markets

Dan Barclay is CEO of BMO Capital Markets, where he is responsible for all of BMO's interactions with corporate, government and institutional clients in globa...


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