BMO Global Asset Management has announced it is divesting from fossil fuels within its £1.6bn responsible funds range.
The new policy takes immediate effect for its Global and Emerging Market strategies within the range, but UK strategies will take longer longer to divest due to the heavy weighting towards oil majors in the index.
As a result the full fund range will not be divested until 1 January 2020.
Director in the governance and sustainable investment team Vicki Bakhshi says there is a lack of choice for divested strategies in the market. This is despite the fact that one third of UK retail investors stating they would like a fossil-free option for their savings, according to a YouGov survey conducted in late 2015.
Bakhshi says the fund range doesn’t just exclude companies, but also allocates capital to companies delivering solutions on climate change.
“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.
“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.”
BMO’s governance and sustainable investment team works in collaboration with its external responsible investment advisory council, which includes the Most Revd Justin Welby and chair, Howard Pearce, formerly of the Environment Agency Pension Fund.
Globally, more than $5.5trn of institutional assets have committed to some form of divestment strategy.
Tesco shifts to renewables
The move from BMO comes as supermarket giant Tesco commits to 100 per cent renewable energy by 2030, becoming the latest company to join the RE100 initiative backed by ShareAction.
Campaigns manager at ShareAction Clare Richards says an investor coalition representing more than $1trn in AUM wrote to Tesco’s chief executive last June to highlight the benefits of joining the RE100 initiative.
ShareAction followed up by raising the issue at the retailer’s AGM.
Richards says: ““There is a clear business case for phasing out reliance on fossil fuels and transitioning to renewable electricity. In setting its own timeline to source 100% renewable electricity by 2030, Tesco is sending an important message that it sees its future business stability and profitability in driving down emissions at pace.”