Baillie Gifford’s Greta Thunberg controversy shows the perils of the ESG engagement argument

Alex Sword


The Financial Services Forum

Depending on who you choose to believe, Baillie Gifford is a “major fossil fuel investor” as it has a whopping 2% of its funds in companies that profit from fossil fuels.

Alternatively, Baillie Gifford is “not a significant fossil fuel investor” due to only having 2% of its funds in companies that profit from fossil fuels.

This was the crossed-purposes debate that unfolded last week over the asset manager’s sponsorship of the Edinburgh Book Festival, demonstrating amply that asset managers and their critics might as well be speaking different languages when talking about ESG action.

The spat started when a publication called The Ferret published the 2% figure on 28 July in an article criticising Baillie Gifford’s sponsorship of the upcoming Festival. They calculated that 2% of the asset manager’s AUM would total around £4.5 billion.

This then led climate activist Greta Thunberg to pull out of the festival on Friday, saying that “greenwashing efforts by the fossil fuel industry, including sponsorship of cultural events, allow them to keep the social license to continue operating.”

Baillie Gifford, which has been a major sponsor of the festival for decades, said in response that it was “not a significant fossil fuel investor” and noted that this 2% figure was below the industry average of 11%.

It pointed out that some of the companies included in this figure “have already moved most of their business away from fossil fuels and many are helping to drive the transition to clean energy”.

In additional notes provided over email, Baillie Gifford said that the figure includes companies with more than 5% of revenue coming from some form of fossil fuel activities. This includes some oil and gas companies such as Petrobras, as well as conglomerates such as Reliance Industries which are diversifying away from fossil fuels.

It also includes the supermarket Tesco, which receives revenue from its petrol stations.

The firm also added that 5% of money was invested in companies working towards clean energy solutions, such as Tesla or carbon capture company Climeworks.

The saga suggests that the asset management industry’s message about the benefits of engagement over divestment continues to have limited cut-through with the general public. The challenge is that the argument cannot easily be summed up in a short sentence or headline.

It broadly runs as follows: renewable energy sources have not yet reached the scale to provide all of humankind’s energy needs. In the interim, fossil fuel use will still be needed while transitioning to renewables. By remaining invested in these companies, asset managers will ultimately be able to use their power as shareholders to achieve better ESG outcomes than if they divested.

To this one might add the need to take a diversified approach when managing capital – while there is huge growth potential in the green energy sector, there are considerable challenges and it is far from risk-free.

But from Thunberg’s perspective, her credibility is at stake. The winner-takes-all world of social media is an incredibly unforgiving one and courting accusations of hypocrisy could be damaging to her persona as a climate activist. This has led the young activist to take a zero compromise approach to fossil fuels, which once saw her attend a UN summit by crossing the Atlantic in a yacht.

The more nuanced argument that engagement is a more effective route to net zero is harder to sell than one that advocates outright divestment from fossil fuel companies. But until the industry finds a way to get its story across, it’s doomed to keep talking at crossed purposes with its critics.


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