BMO makes some progress on net zero

This AGM season, the BC General Employees’ Union (BCGEU) and Investors for Paris Compliance (I4PC) co-filed a shareholder resolution at BMO asking the bank for greater disclosure regarding its climate transition plan. The resolution is in the bank’s proxy circular (p. 100).

Following a constructive engagement, the proponents withdrew the resolution. While the bank is still yet to articulate a transition plan that will fulfil its net zero commitment, the proponents are pleased to see progress on some elements in BMO’s recently released 2022 Climate Report and its 2022 Sustainability Report. Below we elaborate on some of that progress.


“A company’s willingness to engage is an indicator of sound governance, and BMO is no exception. Our thoughtful and constructive dialogue resulted in promising commitments from the bank. BMO has more work ahead, and we look forward to working closely with the bank on its net zero commitments,” said Emma Pullman, Capital Stewardship Officer at BCGEU.

“BMO continues to lead its Canadian banking peers but still has a ways to go on net zero. We look forward to continuing to engage the bank in areas it has pledged to evolve, such as a sustainable finance framework, client evaluation, and its coal policy,” said Matt Price, Director of Corporate Engagement with I4PC.

Impact investing vs. “sustainable finance”

BMO increased its Impact Investment Fund by $100 million from $250 to $350 million. While the numbers are much lower than for its “sustainable finance” goal ($300 billion by 2025), the latter suffers from lack of definition and an inability to measure outcomes. It is unclear how “sustainable finance” differs from ‘regular’ finance, particularly in the context of a bank having an overall net zero by 2050 commitment. “Sustainable finance” deals are also being made with companies increasing their overall emissions. In contrast, the Impact Investment Fund has proof of impact as a key investment criterion.

In its 2022 Sustainability Report (p. 41), BMO states that work is underway to review and update its Sustainable Finance Framework, taking into account market developments and BMO’s Climate Ambition objectives. We hope this results in stronger guardrails against greenwashing and a greater focus on quantifying the overall impact of “sustainable finance.”

Some fossil fuel phase-out

From 2020 to 2021, BMO reports a nearly 50% decline in its absolute emissions for its upstream oil and gas portfolio (scope 3). BMO explains that these reductions are driven primarily by accounting peculiarities related to the PCAF methodology (associated with company valuation) rather than actual emissions reductions, which in reality are estimated at a 3% increase. We applaud BMO’s commitment to report absolute scope 1 to 3 emissions, and to set an absolute interim emissions reduction target for scope 3.

Going forward, we expect these real, absolute emissions to decline, at least in relation to BMO’s fossil fuel investment and corporate banking outside of Canada, which the bank expects to phase-out by 2030 (see footnote on p.51). BMO is the only one of Canada’s largest five banks to commit to some level of fossil fuel phase out. Subject to defensible transition plans (see below), phase-out policies are necessary to ensure Paris alignment.

Client transition plan assessment

Like other banks, BMO relies heavily on ‘working with clients’ to get to net zero, but has lagged in disclosing how this works, particularly with regards to how it evaluates client progress. In its 2022 Climate Plan it provides some detail, with a promise of more.

It states (p. 29) that as part of its Environmental and Social Risk Rating, it will be assessing the

“maturity of client level transition plans, with an aim to aggregate data to track progress of our client engagement strategy. Progress on implementation will be discussed in our 2023 Climate Report, expected to be released in the spring of 2024.”


As outlined in I4PC’s bank report card (Appendix II), BMO’s coal policy currently falls short of best practices, but in its 2022 Sustainability Report (p. 55) it commits to updating its coal statement in light of its acquisition of Bank of the West which used to be owned by BNP Paribas. The latter has a stronger coal policy than BMO, and we hope that BMO will therefore improve its coal policy, including adopting a science-based timeline to phase out coal-related financing.

Risk management framework and targets

Like all banks, BMO is integrating climate considerations into its risk management framework. What is usually unclear is whether the banks are using these frameworks to help manage their financed emissions in a quantitative way - that is, going beyond qualitative assessments to more of a ‘dashboard’ approach whereby transactions are evaluated in the context of the bank’s financed emissions targets.

In its discussion of carbon-related assets (p. 50), BMO confirms that:

“In 2021, we established risk tolerance thresholds for lending to carbon-related assets based on the original TCFD 2017 guidance definition, linked quantitatively to our financed emissions reduction targets.”

It is still unclear whether BMO actively manages progress towards its targets via this process, but it goes further than other banks in disclosing that there are “thresholds” and that these are linked to its targets.