Amazon

Baillie Gifford has invested £670m in firm aiming to drill oil near Amazon

The longtime sponsor of Edinburgh’s book festival has invested hundreds of millions of pounds in a firm which wants to drill for oil near the mouth of the River Amazon, close to a reef which is a wildlife hotspot.

In August 2023 high-profile protests about sponsor Baillie Gifford’s financial ties to fossil fuels were held at the book festival, following a report by The Ferret. Greta Thunberg cancelled her appearance and some authors walked out of festival events in protest.

Baillie Gifford defended itself by pointing out that only 2 per cent of its client’s money is invested in companies that profit from coal, oil or gas. It said it was encouraging the fossil fuel firms it does invest in to “chart a path towards net zero”.

But research by The Ferret has found that, according to filings in the US, Baillie Gifford holds shares worth £690m in the Brazilian state oil company, Petrobras.

Concerns about the environmental and societal impacts of the company’s plans to expand oil production into a region off the country’s coast which is considered a “biodiversity sanctuary” have been raised by campaigners and indigenous groups in Brazil.

Petrobras recently announced a five-year plan in which it earmarked tens of billions of pounds for investment in oil and gas exploration and production. Its chief executive has said he is prepared for the firm to be “the last to produce oil in the world”.

Critics, including from within the literary industry, argue the company’s holding in Petrobras shows a “complete disregard for indigenous communities, precious ecosystems and the global climate”.

But Baillie Gifford has still  insisted it is “not a significant fossil fuel investor” and has significantly less of its clients’ money in oil, gas and coal than the average financial firm. A spokesperson said Baillie Gifford was aware of Petrobras’ plans for oil exploration,  was “discussing them with the company” and helping it reduce emissions.

The book festival said it “depends on corporate sponsors” like Baillie Gifford. Without their financial backing, the festival would be unable to offer a platform for nuanced discussion on issues like climate change, a spokesperson said. 

Great Amazon Reef

Petrobras’ five-year plan includes around £2.5bn of funding for drilling in the ecologically sensitive Equatorial Margin, an offshore region along 1300 miles of Brazil’s northern and northeastern coast. The Equatorial Margin region includes the Bacia do Foz Do Amazonas, or mouth of the Amazon basin. 

The Equatorial Margin is considered promising for new oil discoveries, but is also home to a vast reef system – known as the Great Amazon Reef – which is home to corals, sponges and fish communities. 

It is also reportedly part of a key migration route for dolphins and sea turtles, and a breeding ground for some species of whales. Environmentalists fear the reef could be at risk if there is an oil spill. 

Brazil’s environment agency, Ibama, blocked an initial application by Petrobras to drill an exploratory well in Foz Do Amazonas in May 2023. Ibama raised concerns about the company’s environmental risk assessments, plans to protect wildlife in the event of a spill, and “inadequate” communications with nearby indigenous communities. 

Petrobras has appealed that decision. It points out that, while in Foz Do Amazonas basin, the location of the exploratory well is about 300 miles from the actual mouth of the Amazon River.

However, researchers argue the site is only 30 miles from the Great Amazon Reef and spilled oil could easily travel that far. They also fear that granting a permit to the exploratory well will open the door to further offshore drilling in other parts of the Foz Do Amazonas, which could be closer to the rainforest.

Petrobras has since started drilling exploratory wells in another part of the Equatorial Margin. It believes oil production in the wider region could “improve the lives of thousands of Brazilians” by creating jobs and contributing to economic development.  

Baillie Gifford talks a good game about engaging with companies on climate change, but when you follow the money, this seems to be nothing more than hot air.

Lara Cuvelier, sustainable investment campaigner at Reclaim Finance.

But Suely Araujo, a former chairwoman of Ibama and current policy coordinator of the Brazilian Climate Observatory, said the country could pursue “much more sustainable paths for economic growth”.

“Given the size and intensity of the climate crisis, it is a mistake to choose to open new oil exploration frontiers, especially in a region with these characteristics,” Araujo told The Ferret.

Engage or divest?

Last year’s protests over Baillie Gifford’s sponsorship of the book festival included a threat by authors including Zadie Smith and Gary Younge to boycott the 2024 event unless the asset manager sells its fossil fuel investments, or is dropped as a partner. 

However, some leading Edinburgh cultural figures defended the company. David Greig, the director of the city’s Lyceum Theatre – which also has a sponsorship deal with Baillie Gifford – called the company “forward thinking and progressive” and argued it had a long track record of funding the arts in Scotland.

In response to criticism of its investments last year, Baillie Gifford said it seeks to influence the environmental activities of the companies it invests in by engaging with them through tactics like voting at shareholder meetings. 

Referring to this engagement strategy after last year’s book festival the company wrote: “…if we sold our shares, they would be bought by someone else. That owner may not engage with the company on climate risks or ethical operations. So, it’s far more impactful to be active shareholders to influence a company’s direction of travel”.

The campaign group, Reclaim Finance, conducted research into shareholder voting at 75 fossil fuel companies annual general meetings in 2023 which the group claims found many investors’ climate engagement strategies are “cosmetic at best”. 

Baillie Gifford is not a significant fossil fuel investor. We have only invested two per cent  of our clients’ money in companies with some business related to fossil fuels.

A spokesperson for Baillie Gifford.

“Baillie Gifford talks a good game  about engaging with companies on climate change, but when you follow the money, this seems to be nothing more than hot air,” Reclaim Finance’s sustainable investment campaigner, Lara Cuvelier, told us. 

Cuvelier added: “If Baillie Gifford wants to be taken seriously, it should publicly call on Petrobras to stop its fossil fuel expansion plans”.

Baillie Gifford pointed out it only holds shares in a small number of the companies tracked by Reclaim Finance and said it had voted against the election of directors at one of these firms due to weak plans to transition to clean energy. 

Cuvelier’s view was echoed by that of Ric Lander who campaigns about climate finance with Friends of the Earth Scotland. By putting hundreds of millions of its client’s money in Petrobras, Baillie Gifford had shown a “complete disregard for indigenous communities, precious ecosystems and the global climate”, Lander claimed. 

A spokesperson for Fossil Free Books, a campaign by literary industry workers set up after last year’s festival, said: “Baillie Gifford’s investments in Petrobras and other major fossil fuel companies such as the Chinese National Offshore Oil Company facilitate immense harm to communities around the world.”

They added that research had found Baillie Gifford has almost £10bn in companies with “direct or indirect” links to “Israel’s defence, tech and cybersecurity sectors” which were “currently funding genocide in Palestine”. “This violence is in no way eliminated by Baillie Gifford’s support of the art institutions we love and depend on as workers,” the spokesperson said.

A Baillie Gifford spokesperson said: “Baillie Gifford is not a significant fossil fuel investor. We have only invested two per cent of our clients’ money in companies with some business related to fossil fuels. 

“That compares to the market average of 11 per cent. Of those companies, some have already moved most of their activities away from fossil fuels, and many are helping to drive the transition to clean energy.”

An Edinburgh International Book Festival spokesperson claimed the festival was “committed to achieving net zero” but “like so many others” it was in a “period of transition”.

They said: “Our sector depends on corporate sponsors including Bailie Gifford who have supported us for the past 20 years, without whom we would not be able to continue to offer these important moments of connection and discourse in society. 

“We believe it is absolutely vital for us to sustain platforms such as the Edinburgh International Book Festival, where these very issues can be better understood, with the nuance they require.”

Featured photo credit: iStock and alfnqn.

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