Impact summary BMO Responsible UK Equity Fund

Key risksValues may fall as well as rise and investors may not get back the full amount invested. Income from investments may fluctuate. Changes in rates of exchange may have an adverse effect on the value, price or income of investments.

Screening out sectors or companies may result in less diversification and hence more volatility in investment values.

The BMO Responsible UK Equity Fund aims to provide capital growth with some income, investing mainly in UK equities. Ethical screening criteria are applied to exclude companies involved in damaging or unsustainable business practices.

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Measuring Impact

This report provides analysis of the social and environmental impact of the companies invested in by the BMO Responsible UK Equity Fund. An important framework for understanding impact is the Sustainable Development Goals (SDGs) – 17 high-level goals which set out a roadmap for a more sustainable world by 2030.

This impact summary includes:

Analysis of how the products and services provided by companies we invest in for this portfolio align with the SDGs

Key portfolio impact metrics on carbon, water, gender and innovation

Summary of our engagement and voting on portfolio companies, and how engagement supports the SDGs

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We have assessed how the individual sources of revenue for each company held in this fund correspond to the 169 targets which underlie the 17 Sustainable Development Goals. One company, depending on its mix of goods and services, may have links to more than one goal.

The SDGs most represented are SDG3 – Good Health and Well-being and SDG9 – Industry, Innovation and Infrastructure. Examples of companies linked to SDG3 include Clinigen, which facilitates access to new medicines across over 100 countries worldwide, and Halma, whose technological solutions include a range of healthcare products in diagnostics and opthamology. Companies providing innovative solutions aligned with SDG9 include Johnson Matthey, which provides technologies that reduce air pollution.

34% of business activities undertaken by the companies in the portfolio have no specific SDG link. This includes, for instance, some of the wealth management divisions of the banks we invest in. Some of the activities of our portfolio companies may conflict with certain SDGs, with these negative links also shown in the chart, one example being petrol sales at retailer Tesco.

Investment SDG AlignmentHow the companies in this fund support the achievement of the SDGs through their products and services.

2.1 End hunger and ensure access to safe and nutritious food; 3.3 End AIDS, TB, malaria and other water-borne and communicable diseases; 3.4 Reduce mortality from non-communicable diseases and promote mental health; 3.8 Access to medicines and health-care; 6.2 Achieve access to adequate & equitable sanitation and hygiene; 8.2 Achieve greater productivity through innovation; 8.10 Increase access to finance; 9.1 Develop resilient and sustainable infrastructure; 9.3 Increase access to finance for SME’s; 9.c Ensure universal and affordable access to ICT; 11.1 Ensure universal access to safe and affordable housing; 11.2 Provide access to safe and affordable transport systems; 12.2 Sustainably manage and make efficient use of natural resources; 12.6 Encourage companies to adopt sustainable practices and enhance Environmental, Social and Governance (ESG) reporting; 13.2 Integrate climate change plans into policies and strategies; 16.10 Ensure public access to information and protect fundamental freedoms.

Source: BMO Global Asset Management, as at 31st December 2019, designed for illustrative purposes

Other: SDGs less than 2%, *: SDG targets within the denoted goal that are less than 1%

Negative 4%

Positive 61%

Neutral 31%

Neutral

Other

Cash

Target le

vel: 2.1 13.2

3.3 3.4 3.8 * 6.2 8.2 8.10 *

* 16.10 * 12.6 12.2 * 11.2 11.1 * 9.c

9.3

9.1

Goal le

vel: 1% 3

% 4% 16 % 2 % 12

%

31 % 2 % 3% 4% 6%

16

%

BMO Responsible UK Equity Fund

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Portfolio sustainability metrics

Source: MSCI ESG, Bloomberg as at 31 December 2019. Benchmark is FTSE All Share TR.

Water footprintWe use weighted average total water use as the most widely-available metric to represent water risk exposure, although company-level analysis is needed to understand how these risks are managed. The overall portfolio average is far below the benchmark, with the largest single user being Associated British Foods due to the water-intensity of the food business.

87,662

481,477

0

100000

200000

300000

400000

500000

Portfolio Benchmark

87,662

481,477

0

100000

200000

300000

400000

500000

Portfolio Benchmark

Gender diversityMany markets are seeing progress on gender equality in boards, but change is much slower at senior executive level. We engage with companies to encourage diversity at both levels. Our fund slightly exceeds benchmark averages, with strong performers including information specialist Ascential plc, with 4 women on its 7-member board as well as 44% women in senior leadership grades.

29.4%

26.5%

15.5% 14.4%

0

5

10

15

20

25

30

28.4%0

5

10

15

20

25

30

Percentage of female executives (average)

Percentage of women on boards (average)

Portfolio Benchmark

0

5

10

15

20

25

30

Carbon footprintThe portfolio-weighted carbon intensity is based on companies’ greenhouse gas emissions per US dollar of revenue generated. The fund is significantly below the benchmark on this metric, largely due to the fact that many high-impact companies in sectors such as oil and gas and mining are screened out. Construction firm CRH plc was one of the largest contributors to the fund’s carbon footprint.

0

30

60

90

120

150

63.25

126.86

Portfolio Benchmark

Total water use Gender representationPortfolio-weighted carbon intensity(weighted average, ‘000 cubic metres)

A weighted average gives less or more significance to certain numbers in a data set. Our portfolio-weighted average gives proportionally less or more weight to our underweight and overweight positions respectively, versus the benchmark. This therefore gives a more representative comparison of the portfolio’s impact metrics compared to the benchmark.

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SDG 1 11%SDG 2 3%SDG 3 4%SDG 5 1%SDG 6 5%SDG 7 1%SDG 8 9%SDG 12 9%SDG 13 10%SDG 16 9%No link 40%

3%

5%

9%

9%

40%

1%

4%

11%

1%

9%10%

Engagement by SDG

In 2019 we engaged with 44 companies held in the fund, with the aim of improving their management of environmental, social and governance issues. Key topics included engagement on the payment of a living wage (linked to SDG 1), climate change (SDG 13), and corporate governance (no direct SDG link).

SDG1 – No Poverty 11% SDG2 – Zero Hunger 3% SDG3 – Good Health and Well-being 4% SDG5 – Gender Equality 1% SDG6 – Clean Water and Sanitation 5% SDG7 – Affordable and Clean Energy 1% SDG8 – Decent Work and Economic

Growth 9% SDG12 – Responsible Consumption

and Production 9% SDG13 – Climate Action 10% SDG16 – Peace and Justice Strong

Institutions 9% No SDG 40%

Engagement overviewWe engage with issuers held in the fund to encourage them to improve their management of environmental, social and governance issues.

milestones

companies engaged44

13Source: BMO Global Asset Management

With management 98% Against management 2% Abstain 1%

Total meetings voted

82

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Engagement in Practice

GlaxoSmithKline

Antimicrobial resistance is a natural phenomenon being accelerated by poor stewardship of antibiotics in healthcare and farming. Our engagement is cross-sector, encompassing food producers and purchasers, and pharmaceutical companies. We want to encourage a proactive approach to reduce the emergence and spread of AMR.

We spoke with experts at GSK to understand the company’s approach to this pressing global challenge. The company representatives informed us about safeguards in their operational processes, including limits on antibiotic discharge for GSK’s own manufacturing sites, and its engagement with customers to encourage the responsible use of antibiotics. We discussed how information can be made easily accessible in Emerging Markets, taking into consideration language and literacy barriers.

Our view

The GSK representatives gave a detailed account of their AMR policies, and we concluded that the company is a leader in tackling AMR. Addressing this issue will require cross-sector action and public-private partnerships, so we were encouraged to learn that GSK has been engaging with the UK government on concrete action to combat AMR.

Goal Tesco

As the UK’s largest food retailer, with a huge global supply chain almost half a million employees worldwide, Tesco is exposed to a wide range of sustainability issues. One of the areas we have discussed with the company is the payment of a living wage

We have opened up a dialogue with major retailers worldwide on the payment of a living wage – a wage which allows people to afford the basic necessities of life, which is typically higher than the legal minimum wage. Whilst this may have some short-term costs we have encouraged companies to consider the benefits in terms of lower turnover and improved staff satisfaction. Tesco were highly receptive to our engagement and we had a productive discussion covering both their directly-employed staff and supply chain.

Our view

Tesco was receptive to our engagement. The company did increase their overall benefits package for UK employees which – in total – is above UK living wage rates. They also, for the first time, disclosed along the Workforce Disclosure Initiative, which we included intensively in our engagement. Beyond the social angle of our engagement, they also responded to environmental proposals we have made for a long time, i.e. making all packaging recyclable by 2025.

Goal

This does not constitute a recommendation to buy or sell any particular security.

This financial promotion is issued for marketing and information purposes only by BMO Global Asset Management in the UK and Ireland.

The Fund is a sub fund of BMO Investment Funds (UK) ICVC V, an open ended investment company (OEIC), registered in the UK and authorised by the Financial Conduct Authority (FCA).

English language copies of the Fund’s Prospectus and English language copies of the key investor information document (KIID) can be obtained from BMO Global Asset Management, Exchange House, Primrose Street, London EC2A 2NY, telephone: Client Services on 0044 (0)20 7011 4444, email: client.service@bmogam.com or electronically at www.bmogam.com. Please read the Prospectus before taking any investment decision.

The information provided in the marketing material does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell or otherwise transact in the Funds.

©2020 BMO Global Asset Management. Financial promotions are issued for marketing and information purposes; in the United Kingdom by BMO Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority; in the EU by BMO Asset Management Netherlands B.V., which is regulated by the Dutch Authority for the Financial Markets (AFM). Telephone calls may be recorded. 954095_G20-0988 (04/20). UK, IE.

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Invest

Improve

Avoid

Our Responsible Strategies range is built on a philosophy of:

Avoid companies with damaging or unsustainable business practices

Use our influence as an investor to encourage best practice management of environmental, social and governance issues through engagement and voting

Invest in companies making a positive contribution to society and the environment

How BMO Global Asset Management can help you

BMO Global Asset Management incorporates material ESG issues into its investment processes across asset classes. We also offer our Responsible Funds range, which invests in companies operating sustainably and excludes those not meeting our ethical and ESG criteria.