DATAMARAN PODCAST #5
Financing the Future with BMO
Michael Torrance - Chief Sustainability Officer at BMO
Michael Torrance is the Chief Sustainability Officer and Associate General Counsel at BMO Financial Group. He oversees BMO’s Enterprise Sustainability Program, primarily focusing on putting out relevant disclosure, performing outreach, interacting with operational programs, and ESG risk management.
All of these functions have been put to the test by the stresses of COVID-19. Their response contains valuable lessons for the future of corporate strategy. Even as external risks encroach, the best responses come from internalized ideas about the role of business.
Responding to COVID-19: a social role for business
Torrance is clear in his view of the crisis. Quoting the CEO of BMO, he assimilates the pandemic to “a journey across a bridge. We’re going to get to the other side, but we don’t know how long the bridge is or what it looks like on the other side. Of course, to get to the other side, we need to take one step at a time.” Miscalculating that step can have serious repercussions for stakeholders.
That’s why, for BMO, “our response is constantly evolving.” The key to ensuring that that response is adequate, well-founded, and supportive to stakeholders is information. “To keep the bridge metaphor, bridges are about connecting. And in this period when being distant is the rule, being connected is key for resilience. This is what BMO is doing: We attempt to demonstrate leadership by building programs that support customers and business partners.” Timely and reliable information is key to do this successfully.
This sort of response speaks to an elevated role that business holds in society. As Torrance highlights, there is an increased focus on the social impact and purpose of business. To a certain extent, the COVID-19 crisis is similar to a war - and just like in a war, there is a social mobilization of a response.”
“There is a unique opportunity for the private sector to be impactful on the social response that has been mobilised, but they cannot do so without a genuine sense of social responsibility to their stakeholders.”
As Torrance puts it, businesses need “a root that everyone can fall back on” in a crisis, and that root is purpose. For BMO, this is the aim “to boldly grow the good in business as in life." BMO has relied on this aim to develop new programs to assist SMEs, particularly restaurateurs - ensuring the success of both BMO and their business partners, and helping ensure their community is more resilient to the crisis.
“There is clearly a tangible value to identifying a social responsibility.” It is useful to “think of Sustainability in the context of social expectation. In many ways, gathering ESG data is just mining social expectations.” Because of this connection, there “really isn’t a real dichotomy between shareholder and stakeholder interests - they converge over the long term.”
Acting on that purpose
This position on social responsibility in business reflects a growing consensus in the business world. As the 2019 statement from the US Business Roundtable, an organization which represents the CEOs of major US corporations, reinforces that the purpose of business is “to deliver value to customers, invest in employees, deal fairly and ethically with suppliers, support the communities in which they work, and generate long term value for shareholders.” To Torrance, this sounds exactly like “a framework for dealing with the current crisis.”
More than that, it sounds like what many companies are now prioritizing as business-critical doing. They are reaffirming their “social license to operate” by working towards deeper integration of ESG considerations into core business strategy. “When this started, there was a real question of whether or not ESG would take a backseat. It is now clear the solution to this problem involves increasing focus on ESG.”
“In many ways, gathering ESG data is just mining social expectations. Because of this connection, there really isn’t a real dichotomy between shareholder and stakeholder interests - they converge over the long term.”
Michael Torrance - Chief Sustainability Officer and Associate General Counsel at BMO
Is business prepared?
One of the primary lessons of the crisis has to be how it has shown “just how quickly an emerging issue can become material.” It was also clear that many of the organizations that thought to have been prepared, were not. The question is: why?
Torrance said that it is “too early to unpack all of this, as it's a very broad conversation. What is clearly a part of the answer is that we’re very globally connected. This means that when an issue happens even in a far away jurisdiction, it has impacts all over the world.” There are positives to this, however. There is more ability to “learn quickly from others’ experiences across the world.” And this requires an ability to access more reliable data more quickly.
“Being prepared to change, shift focus, and continue to develop must be the goal of any company or organization.” This is why more and more companies are investing resources and capital into monitoring the external landscape with the support of technology.”
How business can prepare
You do your best to predict certain risks, but you have to accept certain risks cannot be predicted. So the question becomes: is your organization sufficiently resilient to deal with those types of situations?
Michael Torrance - Chief Sustainability Officer at BMO
An understanding of resilience and social responsibility along these lines can lend itself to preparing for future problems,especially the climate crisis. Torrance is not be the first to recontextualize COVID-19 as a “dry run for climate change.” Being prepared for a crisis of this scope means looking at the structures which surround ESG decision-making.
For him, the most pertinent parts of the preparedness question have to do with governance and the ability to gather and synthesize data. “There is a need to understand particular scenarios and factor them into strategic decision making.” There is a similar need to gather data, “without which any analysis will be unrefined and unwieldy.”
“A more dynamic approach is absolutely necessary. There must be a commitment to managing and analyzing these topics, particularly regarding climate change, on an ongoing basis. Being able to mine the whole universe of data with Datamaran allows us to re-evaluate our products and stakeholder interactions in a more meaningful way.”
Ultimately, by reinforcing decision-making processes with a dynamic and data-driven approach, BMO can focus not just on the risks, but also the opportunities.
For instance, BMO has risen to the challenge by, amongst other things, underwriting an $8B Dollar public health bond for the developing world. This positive act, while both “a core part of BMO’s business and a direct tie in to [their] social purpose,” was achieved by being stakeholder-centric, purpose-driven and aware of how the external landscape is evolving.
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