Baillie Gifford trust sells stake in miner Rio Tinto

Rio Tinto is exploring heavy minerals in Mozambique’s Inhambane Province

A trust managed by Baillie Gifford has sold a £20 million sake in Rio Tinto after saying the mining group is not doing enough to address environmental and governance concerns.

The sale by Monks Investment Trust comes amid ongoing concern that Baillie Gifford itself is supporting companies invested in fossil fuels.

Campaigns by environmental activists led to the Edinburgh-based company withdrawing its sponsorship of the Edinburgh, Wigtown and Hay book festivals.

In a stock market announcement Monks said it would offload investments in those firms whose environmental, social and governance record did not meet its targets.

The company’s direct investments in businesses with fossil fuel related activities totalled 2.6% against 4.8% for the index at the year end.

Karl Sternberg, the Monks chairman, said: “The board and the managers take their stewardship responsibilities very seriously. Environmental, Social, and Governance (ESG) factors are intrinsically linked with long-term investing. The managers embed the analysis of these factors into their core research when searching for high-quality growth companies.

“If the managers believe that insufficient progress is being made relating to important ESG factors, they will sell a stock. 

“A recent example includes the miner Rio Tinto, where concerns regarding governance and the approach to environmental impact were not adequately addressed. The company has since sold its holding.”

Monks first expressed concern about Rio Tinto in 2020 after it destroyed a 46,000-year-old sacred Aboriginal site at Juukan Gorge, Western Australia, leading to the departure of the chief executive Jean-Sebastien Jacques and chairman Simon Thompson, the former chairman of Tarmac Group and Tullow Oil.

Initially, Monks and FTSE 250 listed Baillie Gifford appeared to be satisfied by the measures taken in response to the scandal,. However, in a clear expression of frustration at slow overall progress on ESG matter, Malcolm MacColl, co-manager of the trust, said the culture at Rio Tinto still “made us a little bit uneasy”. He added that he was “quite unimpressed by the company,” which specialises in iron ore, aluminium, copper, lithium and other raw materials.

On its website, Rio Tinto says: “We have put the low-carbon transition at the heart of our business strategy: combining investments in commodities that enable the energy transition with actions to decarbonise our operations and value chains.

“Our strategy and approach to climate change are supported by strong governance, and we are building our processes and capabilities to enable us to reach net zero emissions from our operations by 2050.”

Greta Thunberg
Greta Thunberg withdrew from last year’s Edinburgh Book Festival

The company said it operates in 35 countries where its 57,000 employees “are working to find better ways to provide the materials the world needs.”

It adds: “Our portfolio includes iron ore, copper, aluminium and a range of other minerals and materials needed for people, communities and nations to grow and prosper, and for the world to cut carbon emissions to net zero. We continuously search for new projects that can support the energy transition, currently exploring for 8 commodities in 18 countries.”

Baillie Gifford was clearly shaken by the activist activity around its book festival deals and sources say it has no intention of reviving its sponsorship as it seeks to clarify its messaging.

The dispute began last year when environmentalist Greta Thunberg withdrew from the Edinburgh Book Festival and a growing number of authors withdrew support for Hay Festival. Baillie Gifford also withdrew from the Cheltenham Literature Festival and a number of others.

The company has insisted that its investment in fossil fuel companies is far below the typical average investor weighting in the sector.

Monks, which traces its roots to 1916 and manages more than £2 billion worth of global shares, has been a popular collective investment vehicle for private and institutional investors. It focuses on growth companies.

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