Why anti Baillie Gifford grandstanding does much more harm than good

Dumping one of the UK's most thoughtful fund managers as a culture sponsor is a disaster for book festivals - and comes with absolutely no upside.

Yesterday the Edinburgh International Book Festival ended its multi-decade collaboration with Baillie Gifford, one of the UK’s most successful fund managers and a huge supporter of the literary arts. This year’s money is given and spent. But the festival does not intend to take more next year.

The statement on the matter was depressing. The festival’s directors did not end the relationship because they wanted to. They ended it because the “pressure on our team has simply become intolerable” and they fear they cannot deliver a “safe and sustainable” festival this year “under the constant threat of disruption from activists” furious about Baillie Gifford’s connections to fossil fuels and to Israel. The Edinburgh International Book Festival ended it because the organisers were scared (you might ask, as an aside, where the police are in all this).

This is not the first time Baillie Gifford has been financially dumped this week - Hay Festival has also suspended its relationship with the firm. The Hay statement wasn’t quite as firm as that from Edinburgh, but it hinted at the same thing: the action was partly down to “intense pressure on artists to withdraw.”

Baillie Gifford has also released a statement, one brimming with barely repressed and completely justified anger. Nick Thomas, a partner at the investment manager, notes that the company invests very little in fossil fuels - more like 2% of overall assets under management, compared to the industry average of closer to 10% (some might wish it were higher given the recent performance of some Baillie Gifford funds over the last few years, but that is another story). Thomas also says that Baillie Gifford has long had exceptionally high ethical standards, something that in my experience in dealing with it is very much the case (until a few years ago I sat on the board of a Baille Gifford managed investment), that the company focuses closely on “doing what is right by our clients”, and that any assertion that it is somehow significantly invested in the conflict between Gaza and Israel is “offensively misleading.”

Either way, to ask Baillie Gifford to divest from everything connected to Israel and from fossil fuels is, as Thomas points out, to ask authors to stop selling books on Amazon (which operates in Israel) or using Facebook. Authors who back this nonsense might also have a careful think about how they get to the likes of Hay at all - the nearest station is 20 miles from the venue. All travel to it involves fossil fuels. They might also ask how books are made. As Ed Conway, author of Material World, points out, turning wood into paper is a “very energy intensive process” and one that accounts for about 6% of our total emissions (mostly from burning gas to power the mills). But making the paper is just the beginning of making a book. You need to bleach the paper, you’ll need ink and you’ll need glue. The materials for all these things are fossil fuel derived. Someone needs to make sure those fossil fuels are still extracted for some decades to come. If not the thoughtful, responsible, climate-orientated Baillie Gifford, who?

But this automatic activist hypocrisy isn’t just irritating. It has real world consequences. A large part of Baillie Gifford’s support of the festival has been around its Schools and Children’s programmes – which provide free books and make space for children to meet authors. There is barely a child in Edinburgh (mine included) who has not benefited from this extraordinary opportunity to meet real writers. Who will pay now? Public money is thin on the ground - and what sponsor would step up to replace Baillie Gifford? Who could be greener, cleaner and better than they are? And who would take the reputational risk of “activists” checking on that - and threatening their staff if they don’t make the grade? As Allan Little, the chair of the festival noted, without donors such as Baillie Gifford, “the future of festivals like ours - and all of the benefits these events bring to authors and readers alike - is in jeopardy.”

There’s another message to the financial industry in here too. So far there is no evidence that going big on ESG and DEI policies is of any use when it comes to investment returns https://www.bloomberg.com/news/articles/2024-05-10/podcast-why-everyone-believes-what-they-want-to-believe]. Therefore, much of the effort put in here (rightly or wrongly) is either down to a genuine desire to improve matters or marketing. If we are to live in a world where no good deed goes unpunished, what’s the point? ESG and DEI policies are already falling by the wayside at speed https://www.bloomberg.com/opinion/articles/2024-01-29/personal-wealth-esg-and-dei-were-always-luxury-goods. This kind of thing only hurries it up. Not everyone will mind that - but I’m pretty sure it is not what the “activists” have in mind.

All this downside. Is there any upside to the attacks on Baillie Gifford? Sadly, there is not. First, it won’t change where its clients’ money goes. The investment manager won’t be divesting from big tech or from its minute holdings in fossil fuels (its fiduciary duty to its clients doesn’t allow that), just from books – it has no fiduciary duties to the world’s writers. I’m pretty sure that’s not what the “activists” had in mind either.   

Finally even if Baillie Gifford did divest, it would make no difference to the investment world - there is now a mountain of evidence showing that divestment just doesn’t raise the cost of capital for “bad” companies in the way the agitators would like https://www.bloomberg.com/opinion/articles/2024-05-17/student-divestment-victories-feel-good-but-do-little. As the directors of Wigtown Book Festival tweeted yesterday, this is a “disaster not just for book festivals but for the whole UK cultural sector. And to no end.” The chair of the book festival finishes his statement by holding the activists “squarely responsible” for the inhibiting effect their action will have on funding for the arts in the UK. The rest of us should do the same.