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Case study

Bank of Montreal (BMO) case study

EOS Insight
31 October 2024 |

We engaged with BMO in establishing comprehensive governance practices around the ethical use of AI.

Background

As the financial services industry increases investments in digitisation, we are monitoring the implementation of artificial intelligence (AI) and other advanced technologies to ensure companies have robust oversight processes that include monitoring of potential algorithm bias to encourage an emphasis on protecting digital rights.

We engaged with Bank of Montreal (BMO) in establishing comprehensive governance practices around the ethical use of AI and conducting an algorithm impact assessment of the impact level of the banks automated decision-systems.

Our engagement

We first raised our concern with the company in 2020 with follow-up meetings across the subsequent years. The bank updated us in 2021 saying it had a trustworthy AI council comprised of leaders across business lines to ensure the implementation of AI is done in an ethical manner and aligns with company values and regulatory expectations. We encouraged supporting disclosure in its next sustainability report.

Notably, in 2022 we met with members of the sustainability and investor relations teams at the company’s headquarters. We asked about the bank’s AI strategy, to which it reassured us AI remained a priority.

We met with members of the sustainability and investor relations teams at the company’s headquarters.

The following year, we learned the bank was reviewing ethical, privacy, and compliance risks and had established escalation mechanisms through governance forums, including by ranking applicable risks, filling out questionnaires, and assigning quantitative scores. The bank was also updating its broader applicable risk frameworks with generative AI becoming more prevalent.

While the bank was making good progress on AI, in 2024, we encouraged greater disclosure on board oversight of the intersection between artificial intelligence (AI) and human capital.

We encouraged greater disclosure on board oversight of the intersection between artificial intelligence (AI) and human capital.

Changes at the company

In 2023, the bank disclosed in its sustainability report that it had built governance practices to adhere to its internal and regularly expectations, including by establishing the Responsible AI and Data Ethics Forum to ensure that any application of AI technologies at BMO aligned with its Code of Conduct, risk management frameworks and regulatory expectations. Members of the Forum have expertise in legal, compliance, privacy, ethics, cybersecurity and other applicable risk areas, and provide guidance on identifying and mitigating any such potential risks associated with AI.

With respect to board oversight, AI and data security fall within the category of operational non-financial risk, which is the responsibility of the chief risk officer and is overseen by the risk review committee. The bank has enhanced AI and data analytics capabilities across the organisation, and focuses research on emerging and innovative technology.

The bank has enhanced AI and data analytics capabilities across the organisation

According to the Evident AI Index, the bank scores above peer averages ranking 16th out of 50 banks and scoring 34.6 out of 100 points. The Evident AI Index is a third-party benchmark that compares the AI capabilities of major banks globally.

Next steps

We will continue to engage on responsible AI. We are also increasing our engagement focus on the impacts of AI on workers. We will ask companies to explain the positive and negative impacts of AI on workers, along with an explanation of their strategy to maximise positive and mitigate negative impacts.

Check

This case study has been fact-checked by Bank of Montreal to ensure a fair representation of EOS work carried out and changes made at the company.

Case studies are shown to demonstrate engagement, EOS does not make any investment recommendations and the information is not an offer to buy or sell securities.

Engagement objectives

Sustainable Development Goals

9257

Top three successes

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