Why getting the balance of ESG right is the right thing to do for both BMO and for Canada
“When you think of these topics, like climate, sustainability, or diversity, they cannot become performative things where you say one thing and do something else. It's not a marketing tool. It really has to be about what your company stands for”
A conversation with Sharon Haward-Laird, General Counsel, BMO Financial Group on the role Canada’s banks can play in facilitating the changes we need to see around environment, social and governance issues and why BMO Financial Group is committed to leading this transformation.
Jon: Hi, welcome to another episode of Shift. Thank you so much for joining us. We have an amazing guest today, Sharon Haward-Laird, who's General Counsel of BMO Financial Group. Welcome to Shift.
Sharon: Hi, Jon. I'm really pleased to be here today. Thanks for having me.
Jon: Sharon, lead counsel at BMO, tell us a little bit about how all that came to be and how you came to be in the position that you're in right now.
Sharon: Sure. As you said, I'm General Counsel at BMO and I've been in that role for just over a year. I've worked at BMO for about 22 years though, which is amazing, it's gone so fast. My main job is leading the bank's legal and regulatory compliance groups. I'm also the executive sponsor for three areas of focus, which are sustainability, which is what we're talking about today, the BMO for Women program, which has a connection to that as well and digital currency. All of these things focus on the bank's role in society and how we interact with society to make it a better place.
Jon: The neat thing about what we're going to talk about today, I think is one of the most talked about things in, I don't know, the business world right now, I suppose, and that's ESG. And for those of you who don't know what ESG stands for, it's environment, social and governance. And it's a really big topic and it's hugely important to organizations right now. So I'm really delighted that you're here and that we get a chance to talk about what BMO is doing, because I'm not too sure, even though we're going to talk about how amazing BMO is in this space, I can't imagine that too many consumers necessarily think that a financial institution is one of the leaders in this space. Is that surprising to you?
Sharon: That’s a great point, Jon. I think that one of the biggest surprises for me when I took the role as General Counsel, which was about a year ago, is how much of my time I spend on ESG. Our former General Counsel, Simon Fish, likes to say there are three letters in ESG, E, S and G, and the one that matters most right now is climate. So C.
But the truth is, all three elements of ESG are equally important and getting the balance of those right is important. When you think about a bank really sitting at the intersection of finance and the amount of transition and the involvement in growing economies and helping people achieve their own financial goals, I do think that banks like BMO, but all banks can play a really important role alongside governments and their customers and other parts of the economy and really facilitate the change that we need to see.
Jon: Well, I mean, I think as a financial institution, you guys have the scale and the clout to actually make significant changes that other organizations can follow.
I wonder whether or not a lot of organizations think about ESG as a box they need to check off.
And I love the fact that for BMO, and I mean, this may sound like a tagline or something, but you're finding value in your values. There's things that are intrinsic to the organization from the environmental sustainability and governance side of things. You guys are taking it really seriously. It's not just an add-on, it's an actual thing that's important to you. Can you tell me a little bit about why?
Sharon: That is a great point. When you think of any of these topics, like climate, sustainability, diversity, these cannot become performative things where you say one thing and do something else. It's not a marketing tool. It really has to be about what your company stands for. You do really have to have focus because if you try to say, "I'm going to have a position on every single thing that any stakeholder might care about," it's actually hard to manage all of that and do all those things well.
Jon: That's really interesting because I love the fact that you're not just making stuff up. You're actually going out and speaking to your stakeholders, to really create solutions for the people that you're making them for. So I'm just really curious, who's in that stakeholder group? Who are you asking?
Sharon: It's interesting, especially in Canada where the banks play such an important role in the economy, our stakeholder group is really broad. It includes customers of course, because without customers, you don't have a business. Our investors, because they are the ones who provide the capital that allows us to continue to serve our customers. Our regulators, they tell us from a risk perspective, what aspects of ESG they want to make sure we have a good handle on, and then the general public.
People look at what you do and they judge your conduct against what they care about. I have missed a really important stakeholder group, which is employees. Employees want to work for an organization that reflects what they care about. They don't want to go to work and do something for a company that doesn't feel connected to their own purpose. Everybody wants to feel proud when they read a story about their company in the paper or when friends use the products that their company generates.
Jon: Do you see a shift in your employees and how important purpose and values are?
Sharon: I don't even know if I would call it a shift as much as a transformation. I look at myself in my role prior to the pandemic. I spent three or four days a week travelling to Chicago and not being at home. I just thought that was normal and I was used to it. Then when you're at home every day, all day with your family there are times you drive each other crazy, but you realize how much that connection to your family matters.
When work and home boundaries seem blurred, I think it's even more important that your work has purpose to you.
Jon: It's almost like a bit of a win-win or it's exponentially excellent. Because you're helping society, you're helping Canadians, you're helping the bank, you're helping employees, it all dovetails together. I love the fact that the Dow Jones Sustainability Index puts you guys as ranked as one of the most sustainable companies in the world. I just have to say, "Wow, that's amazing."
And I think, one of the things that people will find really interesting is that you actually do stuff that matters and I'd love to talk about some of the initiatives that you're doing that are actually making a huge difference. Especially around your support for women.
Sharon: Sure, as I said earlier, I'm the executive sponsor for BMO for Women. It is a big part of our Purpose commitments. We have three broad Purpose commitments, and one is for a thriving economy. In 2018, BMO committed to make $3 billion in capital available to women business owners over a three-year period.
Sharon: Then in 2019, we made a commitment to double our support for women entrepreneurs by 2025. We became the first Canadian bank to sign the UN Women's Empowerment Principles. We have a bunch of different programs that provide specialized support to women business owners. When I was first asked to get involved, I was like, "Well, is there really anything different about being a woman business owner than a male business owner?" And the truth is that there is. I have my own personal experiences. I've never owned a business, but when I interact with business professionals, when I've gone to buy a car, even if we're very clear that the car is for me, that I'm the one that's paying for the car, that I'm the one that's going to be driving the car, sometimes it's very difficult to get people to address me versus my husband.
I think those kinds of implicit biases, we're still making progress towards understanding that women are uniquely positioned to identify areas of need and to grow businesses that will help the economy. It's important and I'm really excited. It's a new part of my role, support for BMO for Women and the clients that we interact with are so inspiring to me, way braver than I've ever been in my career.
Jon: How do you go about prioritizing and deciding where to lean in? There's so many things that you could do. How do you decide?
Sharon: Our stakeholder’s expectations really are a large driver of our strategy. Now, you have to listen and then you have to develop a strategy. No strategy is going to please every stakeholder. There are some people who would want a very rapid transition and there's a lot of discussion now. I think everybody understands the transition has been too slow.
We benchmark ourselves against other banks. We're part of a lot of different organizations. Along with the other Canadian banks, we joined the Net-Zero Banking Alliance, which is a UN convened group of banks that have all made commitments to aligning with the net zero future by 2050 and to setting interim goals for 2030. So, we benchmark ourselves, we think about approaches and framework.
Then going back to something you said, we've obviously won a number of recognitions and awards, but that doesn't make us complacent. We know that the data, the science, the expectations, the climate events will continue to change, and we need to make sure that our approach is flexible enough that we can make changes based on what we're seeing from peers, and from our customers. All of those sorts of things are something we really need to think about.
Jon: I love that you're saying, "We're not complacent." Because going back to something we talked about earlier in terms of ESG being one of these boxes that a lot of organizations just check off and if it's checked off, it's like, "Okay, that's good. Pretty good. Yep. Check." And there's no desire, hunger, drive. There's no fuel to it. And it's like, "Okay, that's good. We got that box checked. Now we’ve got to do more."
I wonder whether some organizations see this as a cost of doing business. So I'm trying to figure out how to convince people or show them that it's not just a loss leader, if that makes any sense.
Sharon: It's a great point. Maybe the right way to put it is there's an offense and a defense part to addressing climate change. So, if you look at some estimates, it will take $150 trillion of investment to meet the Paris goals. De-carbonization is not going to be easy and there are opportunities to finance the necessary investment, but we can also play a role to quantify, analyze, and disclose information on climate related transition. That provides information that policy makers and markets can use to drive different changes in policies.
The commitment says we will only succeed if everyone does their part. There has to be an expectation that governments will follow through on their own commitments to ensure the objectives of the Paris agreement will be met. It is an ambitious goal and there are a lot of inter-related and economy wide confirmation that is required.
Like addressing diversity, addressing climate change is both good business for a bank and the right thing to do at the same time. Those two things are not in opposition. They are mutually beneficial. But they're complicated as well. There will be many different views about the pace and the means by which transitions should be facilitated.
Jon: Well, I want to underscore what you just said, it's so important because I think a lot of organizations, maybe a lot of leaders feel like they're diametrically opposed, driving value for the organization and driving value for the environment, and that they can be symbiotic. They can work in concert, they can support each other as opposed to, you can either make money or you can save the world, it’s and both. Yeah.
Sharon: Right, the truth is no one company, bank, or government can save the world in isolation.
Sharon: It really does all have to work together. Let's use a very specific example. The Canadian government has said, I think it's by 2035, that 100% of new vehicle sales will be electric vehicles. When you think about all of the infrastructure that's required, where is everybody going to charge their cars? If you have street parking, where are you going to charge your car if you have an electric vehicle?
There's a cost, a risk, and an opportunity for whoever develops solutions for those sorts of things. What we're trying to do, especially through our Climate Institute, is really help our customers see the opportunities as well as the areas that are going to be hard. It’s no different than other areas of business. Because the technology, the expectations, and how people live their lives changes and you've got to be constantly changing and your approach towards climate is not going to be any different than that.
Jon: If there are organizations out there that want to do more, but don't really know, how do you get started? How does a big enterprise think about ESG and incorporate it in a way that's authentic to them? How do you do that?
Sharon: I've talked a lot about stakeholders. I'd start there, talk to your stakeholders. Who are your customers? Find out what's important to them. Challenge your own assumptions about what your business is about. What is your purpose? What social good do you create? How do you integrate these broader stakeholder interests into your own plans? Asking these questions will help you to focus on what matters.
One of the things we're doing so that our bankers are well equipped to talk to their customers about this, and there's lots to talk about, like are there grant programs they can use to try to convert to solar, or if you're in the agriculture industry, or there are agricultural programs to help you make your farming more sustainable, for example.
We also have customers who are people, not companies. I mean, I guess all companies are made up of people. But on the individual level, we've talked to some customers who really want to do their part. It's actually more complicated than you would think.
Jon: It's very hard.
Sharon: But you can start to explore some of those things, what are the things you can do to get ahead of all of the transformation that's going to be required?
Jon: So as you're deciding what initiatives to do and what initiatives not to do and prioritizing and talking to stakeholders, figuring this out, how do you manage the fact that there are probably people out there that think, "Oh, BMO should do X," but you're not? Or you shouldn't do Y but you are. How do you manage the expectations from employees and customers?
Sharon: I think you have to look at the prioritization, you have to develop your own strategy. You need to socialize it in your company. Then you need to be transparent about it and say, this is why we've taken this approach. Or this is why our target is X instead of Y, or this is why we don't have a target yet in some areas.
Then I think you have to be open that sometimes people will share some additional information and if you hadn't considered it, you should be open to saying, "Look, we put out our sustainability and our climate report once a year and we make changes in our approach. But you also do need to link it to your purpose.
Jon: You touched on this notion of iteration and agility. And it's like you start with one thing, you test your assumptions, you prototype something, you put it out there and then it's okay to iterate and to change things based on what's working for you, what's working for your customers, how the world is changing, But I love the fact that you're saying it needs to be true to the organizational values. What is the brand about? What are the attributes that are important? Those aren't going to change. How you think about them and how you execute them out in the world will change, but the fundamentals don't. And I think it's very easy to get caught up in shiny objects and change your values and your purpose. I'm delighted to hear the advice that you're giving.
Sharon: I think a lot of that alignment to your purpose, really comes with that important tone from the top, a strong top level commitment. Our CEO, Darryl White, is very committed to this topic. That makes it much easier to drive ESG into your culture and integrate it into your core business processes.
Investors are much more engaged about this topic. The knowledge of your different stakeholders is growing. So it's important that your knowledge grows along. You don't want your stakeholders to know a lot more about a topic than you know yourself, because then you can't engage intelligently with them about it. You can't give them the confidence that even if they might not agree with everything that you've decided, if they have the confidence that you've really thought it through and that you have a plan that makes sense, even if it's not the plan they personally would've come up with, I think you can come from a place of mutual respect on these topics and agree to continue learning from each other.
Jon: When I first started researching and getting into understanding BMO's perspective, my first reaction was, "Wow. One of our biggest financial institutions is a global leader in this." And at first I thought, "That's really weird and unusual." I didn't expect it as a regular citizen, if you will. Now that we've had this discussion, it makes perfect sense. Who better? Who has the clout? Who has the scale to do this properly and to actually show it is a two-way street? You can have value, you can derive value from your values. It's good business for everybody. It's not an either or. And I always thought about it some ways it's an either or. But it isn't, it's an and both. I love that.
Sharon: We obviously have strong competitors. All the Canadian banks joined the Net-Zero Banking Alliance. Because I think there is knowledge across financial institutions that there is a role for banks to play. Banks cannot do this alone. They cannot. And I don't think anybody thinks they can.
But we can be an important driver or partner with our clients. At BMO, we want to be our client's lead partner in the transition to a net-zero world.
Jon: Yeah. Having the multi tentacles, if you will. The banks touch every part of business, from the most sophisticated large enterprise down to the yous and mes of the world, just the regular people who have a checking account or whatever. And so being able to be the leader or the instigator, the inspiration, just show the way, lead the way and to help people along makes absolutely perfect sense.
Sharon: I’d end by saying we have our Purpose commitments and we have talked a lot about climate and that’s the sustainable future part of it. We do have two other pillars: the thriving economy we spoke a bit about that, and then our zero barriers to inclusion pillar and we have goals around all of those.
Jon: So before we get into our lightning round then, do you have any final advice or things for our listeners to be thinking about as they go off and start to think about ESG?
Sharon: I will just say that there is a role for everybody to play in this. We are really proud as I said of the awards that we've won, but we know we're not perfect. We know we have more to learn and more to do, and we're going to continue to push ourselves and help our clients because that's what we're here for as bankers. We're here to help clients and we don't exist without clients. I would say reach out. We have a lot of resources. We're continuing to build them through the Climate Institute. And I'd say, just continue to educate yourself.
Jon: And don't give up.
Sharon: We can't give up.
Jon: Difficult is worth doing.
Sharon: Failure is not an option.
Jon: So I'm going to ask you a few questions and then we'll wrap it up, okay?
So lightning round.
Sharon: Lightning round.
Jon: I'm curious, do you put pineapple on your pizza?
Sharon: Never. I don't like to mix sweet and savoury flavours. Never.
Jon: So it's sacrilege. Okay. Cool. I like pineapple in my pizza. And there's two kinds of people, people who like pineapple on their pizza and people who don't.
Sharon: Now I'm not so sure.
Jon: Are you a night owl or an early bird?
Sharon: It depends on the day, early bird for work, night owl on the weekend.
Sharon: Which I know is against all of doctors' advice for sleep etiquette.
Jon: Best place you ever vacationed?
Sharon: I love going to my cottage.
Jon: Now, where's your cottage, if you don't mind me asking?
Sharon: Stony Lake.
Jon: Oh, nice. Awesome. Do you have any Netflix recommendations for our listeners? Or binge worthy shows?
Sharon: I love Ozark, which I just finished watching and they really teased us with that. My guilty pleasure is Selling Sunset.
Jon: Oh, I haven't seen that one. And then last lightning question, if you weren't doing what you're doing now at BMO, what might you be doing?
Sharon: I'd like to be a history professor. I always wanted to be a history professor. I loved ancient Egypt history.
Jon: An Egyptologist.
Jon: Well, I want to thank everybody, obviously Sharon for being with us and all of our listeners for listening. I know you have lots of other choices for your podcast, so really appreciate you spending the time with us. I learned a ton and I'm super inspired by what you're doing. Sharon, thank you so much for being on Shift and sharing your amazing ESG journey with us.
Sharon: Thanks so much for having me. Have a great day everyone.
Jon: Until the next time, we'll see you on Shift.