Since 2015 BMO Global Asset Management has been engaging with market participants on green, social and sustainability bond market issues.

A key aspect of its approach has been to develop credit-specific environmental, social and governance (ESG) scores for bond issuers, of between -2 and +2, based on the analyst's view of how the company's ESG profile impacts its overall credit profile.

The ESG score is then integrated into BMO's wider scoring system to give an aggregate credit score, and those with a lower credit score require a higher yield for BMO to invest. A company is able to improve its credit score through engagement and a provable commitment to improve its ESG profile.

Through the firm's engagement with fixed income issuers, it concluded that the traditional argument that companies are reluctant to engage with credit financers on ESG issues, as they are not equity stakeholders, is misplaced.

BMO argues that, due to the constant financing need that bond issues fill, companies are every bit as willing to meet and engage with bond investors as equity investors on ESG issues. The need for successful bond issues, BMO's research found, is a strong reason for bond issuers to accept engagement meetings and to discuss ESG issues.

In addition, the growth of the green, social and sustainability bond market has further improved investor access to traditional bond-only issuers and, as a result, they have added ESG to their agenda. EF