The three major Crown Financial Institutions (CFIs) have hired a Canadian-headquartered fund manager to engage on their behalf with offshore firms on environmental, social and governance (ESG) issues.
Under an agreement finalised last week, BMO Global Asset Management will take on the company ESG engagement role previously carried out by the New Zealand Superannuation Fund (NZS) for its own portfolio as well as the Accident Compensation Corporation (ACC) fund and Government Superannuation Fund (GSF) international investments.
Collectively, the three CFIs manage more than $65 billion with NZ Super nudging $30 billion, ACC on about $33 billion and the GSF holding $4.2 billion.
BMO would pool the CFI investments in offshore companies with other clients’ holdings to push for changes in firms identified as having sub-par ESG practices.
In a statement, BMO said its “global engagement service, known as reo®, is currently applied to £68.3bn (US$106.5billion/€88billion) of assets”.
“It covers a range of environmental, social and governance (ESG) issues, and will, on behalf of the three CFIs, engage with specific companies encouraging them to actively manage risk and enhance their business performance by adopting better ESG practices,” the statement says.
Matt Whineray, NZS chief investment officer, said the NZS would retain responsibility for ESG engagement with local firms on behalf of the CFIs.
An NZS spokesperson said the fund would report publicly on any BMO engagement activities.
However, the spokesperson said the agreement did not include any joint CFI divestment policies.
“In the end [the CFIs] will make their own decisions,” the NZS spokesperson said. “This is more about information-sharing.”
Paul Bevin, GSF head of investments, said the CFIs have been co-operating on ESG issues for a long time – including sharing MSCI data – but the new arrangement would bolster its effectiveness.
“You have to ask how much influence New Zealand funds can have on global companies,” Bevin said. “BMO can pull our funds together with other investors to have a greater say.”
He said the three CFIs have an agreement to share the BMO costs.
BMO Global Asset Management, which emerged out of the Bank of Montreal, has “more than US$279 billion in assets under management globally”, according to the group’s website.