Quick Listen: Michael Torrance on Empowering Your Organization to Operationalize Sustainability

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Michael Torrance 29 juin 2023 Sustainability Leaders Finance durable Nos Balados

Disponible en anglais seulement

Michael Torrance recently participated in a panel at the IBM THINK Conference to discuss sustainability and the role financial institutions play in creating a sustainable future.

In this episode:

•We can think about sustainability as how companies navigate very complex social expectations which converge around environmental impact, social impact governance and how businesses maintain trust
•Over the last 15 years, these social expectations have been standardized for how companies can manage sustainability in their business practices
•More recently, there has been an evolution in how we regulate and measure sustainability practices

Sustainability Leaders podcast is live on all major channels including Apple, Google and Spotify.

TRANSCRIPT

Disponible en anglais seulement

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic, and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment business practices and our world.

Speaker 2:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates, or subsidiaries.

Speaker 3:

Michael Torrance recently participated in a panel at the IBM Think conference to discuss sustainability and the role financial institutions play in creating a sustainable future.

Interviewer 1:

Our first guest is from BMO Financial Group, also known as the Bank of Montreal, established in 1817. BMO Financial Group is the eighth-largest bank in North America, by assets totaling $1.14 trillion. Sustainability is embedded in their strategy, and they're recognized by Corporate Knight's 2023 ranking of the world's 100 most sustainable companies as the number one most sustainable bank in North America for the fourth year in a row and in the top 15% of banks globally for sustainable revenue. Please help me welcome the Chief Sustainability Officer for BMO Financial Group, Michael Torrance.

Interviewer 2:

It's good to see you, Michael. Take a seat. So Michael, welcome. You've been such a great client for us at IBM Consulting, and we're doubly pleased to have you here because you guys in financial services in particular have really been leading the way in helping businesses to think about and shift their thinking around sustainability and ESG. But let's start with you personally. You are an attorney. You are a lawyer, and you're now working in corporate sustainability. So can you tell us about your personal journey into sustainability, and then maybe a little bit about how the role of regulatory risk is driving how your company approaches sustainability?

Michael Torrance:

Absolutely, and thank you for having me, first of all. I've had a ringside seat to the evolution of sustainability over the last 15 years, and I've been fortunate to have that. I'd like to think of sustainability really as how companies navigate very complex social expectations. If we think of those expectations, they're not really randomly distributed. They really converge around certain expectations around environmental impact, social impact governance, and how businesses maintain trust. So really, the phenomenon over the last 15 years has been the standardization of those expectations into how businesses can manage for sustainability. But then there's been an evolution recently about that being really a regulated space, which it hasn't been before. So as a lawyer, it's been interesting to go full circle to see it become a regulated topic, but I do agree with your initial premise from the introduction that data and technology is increasingly going to be the key unlock for us to be able to manage just the level of sheer complexity and the level of rigor that is being expected of companies.

Interviewer 1:

So tell us a little bit about what role you think the financial services industry plays in enabling energy transition, the climate change mitigation, and adaptation across all industries.

Michael Torrance:

So energy transition is really tied to a concept of net zero, which is a policy objective whereby, by 2050, the goal is to have no more emissions being put into the atmosphere than are being taken out. If the world can achieve that objective, then we'll be able to mitigate the most severe risks of climate change. If we can't, then those risks might manifest. So as a bank, we have to think what are the risks associated with that context, and then what are the opportunities? So across our value chain, we have our own operations, we have real estate, but really, that's not our biggest impact on climate. It's actually going to be about how we engage with our clients. BMO has set out a Climate Ambition, we call it in 2021, which is to be our client's lead partner in the transition to a net-zero economy.

To achieve that net-zero by 2050 goal, the real drivers are going to be decarbonizing sectors like heavy industry, transportation, power generation, agriculture. So the biggest role we feel that we can play is to help facilitate that transition through finance and investment and to provide advisory services, for example, about how decarbonization can occur, and then again, to be there to capture the opportunity that might come from being the bankers that can help finance that transition. So all of that, though, requires us to have much deeper insights of our clients than we've had formerly. We have to be able to understand where they are in terms of their own emissions, and we have to be able to give advice on decarbonization pathways from a resilience perspective. We have to be aware of physical climate hazards, flood, wildfire risk, and all of these are being integrated into core business processes from business strategy to risk management and even corporate governance.

Interviewer 2:

So thanks for acknowledging the data issue. How do you actually approach the solving of that? Especially now, particularly in your industry, you have all of these new requirements coming from investor-grade reporting like the SEC and like OSFI. How are you thinking about that?

Michael Torrance:

Yeah, so as things become increasingly regulated, there's some very specific processes and expectations that regulators, but also others and particularly investors, have about how companies measure, monitor, and report on sustainability.

Interviewer 2:

Yeah.

Michael Torrance:

So an example in the regulatory context or even the disclosure context is around climate scenario analysis. So banks are being expected to quantifiably measure climate-related impacts on the business. So you can look at things like flood risks for assets that we may be financing, for example. So to do that, you have to employ big data approaches. You have to have data sets that are not really traditionally part of bank processes, from flood risk data to physical location data, to be able to assess transition risk and carbon transition. You have to be able to know emissions profiles and that kind of thing. So it's a whole new world. Then the level of rigor that's expected when you have regulatory standards, they have to be auditable requires very sophisticated processes that are all being built in the financial sector right now.

Interviewer 1:

So you just touched on this a little bit, but if you could go a little bit deeper on how you're further integrating climate considerations into your company strategy and the products and services you were just touching upon, tell us a little bit more.

Michael Torrance:

Yeah, absolutely. As we build this out, I should say IBM's been a great partner for us to really help us get our digital infrastructure. You can pay me later, fella.

Interviewer 2:

I've already paid you quite a lot, Michael. The envelopes out the back.

Michael Torrance:

But you have been a great partner to help us really get a handle on all this data, which we can use for a variety of purposes. We talked about regulation. That's a risk focus, but there's also business opportunity, which has actually been a real prioritization for BMO, and in a way that I've tried to sell the real leaning into this topic of climate in the organization because there's a huge opportunity. There's over $5 trillion a year in investment, by some measures, that will be needed to actually effectuate the transition. So a couple of examples of how we've incorporated this. We acquired a firm called Radicle last year, which is a carbon credit origination and trading platform. A lot of it's all digitized, actually, and it's a way for us to engage with our clients more on their decarbonization journey and help them monetize that. It's really tied into a trading desk business, which is tied to our financial institution's business.

Another example is our sustainable finance goal. So we've set a $300 billion objective to mobilize sustainable finance, and that's an area where it's very difficult to be able to know what your lending goes to, for example. How many wind farms do we finance? How many solar panels do we finance? Maybe we're financing a biodigester on a farm. So to get at that data, one of the challenges we're working with you on is leveraging AI, for example, or natural language processing because there's probably notes to file somewhere in a database that talks about this, but it's not readily queryable. So if we're going to be able to really measure our progress, we have to have better ways of being able to identify what we're doing and what our clients are doing.

Interviewer 2:

I think that's really interesting and really reinforces the point we were making about sustainability is good business. You see it as a big business opportunity. Final question, Michael. In the end, making progress on this is all about leadership, as much business change is. So how is your company really thinking about how you hold your leaders accountable and how you actually measure the progress that they're making?

Michael Torrance:

Yeah, there's a couple of aspects to that. So we're a purpose-driven organization, and so I think tone from the top is an important opportunity, and thankfully we've had a really strong tone from the top that, as part of our purpose, promoting a sustainable future and being really conscious of our opportunities and managing our risks around climate is an important piece of that. Having that top-level commitment, I think, gets buy-in across the organization, and I've seen that in practice.

The other aspect, though, is to try to better have incentives and to align your practices around scorecards or perhaps compensation. We do that a lot around qualitative measures at this point, but the goal is to be able to do that more quantitatively. So some of the things that we've talked about, if we can measure our climate-related finance or our sustainable finance, we can measure our risk performance. It's going to allow us to do that better. Then you can have stronger tie-ins to rewards and compensation, for example.

Interviewer 2:

Brilliant, Michael. We really appreciate your perspective and thank you for the continuing partnership. Ladies and gentlemen, please join us in thanking Michael.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode and to see our other podcasts, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe for free to our show on Apple Podcasts or your favorite podcast provider, and we'll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO's marketing team and Puddle Creative. Until next time, I'm Michael Torrance. Have a great week.

Speaker 2:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates, or subsidiaries. This is not intended to serve as a complete analysis of every material fact regarding any company, industry, strategy, or security. This presentation may contain forward-looking statements. Investors are cautioned not to place undue reliance on such statements, as actual results could vary. This presentation is for general information purposes only, does not constitute investment, legal, or tax advice, and is not intended as an endorsement of any specific investment product or service. Individual investors should consult with an investment tax and/or legal professional about their personal situation. Past performance is not indicative of future results.

Sustainability Leaders Finance durable Nos Balados 29 juin 2023

Michael Torrance Premier directeur de la durabilité

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Sustainability Leaders Finance durable Nos Balados 29 juin 2023

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Disponible en anglais seulement

Michael Torrance recently participated in a panel at the IBM THINK Conference to discuss sustainability and the role financial institutions play in creating a sustainable future.

In this episode:

•We can think about sustainability as how companies navigate very complex social expectations which converge around environmental impact, social impact governance and how businesses maintain trust
•Over the last 15 years, these social expectations have been standardized for how companies can manage sustainability in their business practices
•More recently, there has been an evolution in how we regulate and measure sustainability practices

Sustainability Leaders podcast is live on all major channels including Apple, Google and Spotify.

TRANSCRIPT

Disponible en anglais seulement

Michael Torrance:

Speaker 2:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates, or subsidiaries.

Speaker 3:

Michael Torrance recently participated in a panel at the IBM Think conference to discuss sustainability and the role financial institutions play in creating a sustainable future.

Interviewer 1:

Interviewer 2:

Michael Torrance:

Interviewer 1:

So tell us a little bit about what role you think the financial services industry plays in enabling energy transition, the climate change mitigation, and adaptation across all industries.

Michael Torrance:

Interviewer 2:

Michael Torrance:

Interviewer 2:

Yeah.

Michael Torrance:

Interviewer 1:

Michael Torrance:

Yeah, absolutely. As we build this out, I should say IBM's been a great partner for us to really help us get our digital infrastructure. You can pay me later, fella.

Interviewer 2:

I've already paid you quite a lot, Michael. The envelopes out the back.

Michael Torrance:

Interviewer 2:

Michael Torrance:

Interviewer 2:

Brilliant, Michael. We really appreciate your perspective and thank you for the continuing partnership. Ladies and gentlemen, please join us in thanking Michael.

Michael Torrance:

Speaker 2:

Michael Torrance Premier directeur de la durabilité

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