UPDATED Investment arm of B Corp Lombard Odier makes £11m bet on controversial Bahamas oil project

Swiss fund company Lombard Odier Investment Management (LOIM) has invested £11.25m (€12.7m) to fund an exploratory oil drilling project off the coast of the Bahamas which has drawn opposition from environmental campaigners and members of the US Congress.

Under a funding agreement with the oil well’s owner – the London-listed Bahamas Petroleum Company (BPC) – LOIM initially provided £7.5m ($10m) of capital which was followed by a subsequent investment of £3.75m ($5m) earlier this year. LOIM received a total of 562.5 million BPC shares in return, roughly amounting to a 12% stake in the company based on 4.7 billion outstanding shares.

LOIM has the option of subscribing to two additional tranches of 46,875,000 shares, priced at £0.03 and £0.04 per share each, over the course of a year. 

The investment was made through LOIM’s 1798 Volantis Fund, a hedge fund focusing on UK small caps with around $425m in assets. LOIM took over the fund’s management in 2016 from previous owners AlphaGen Capital.

A coalition of local and international NGOs campaigning against the project argue that an oil spill in the location of the oil well would be catastrophic for the protected marine parks, coral reefs and diverse ecosystem off the coast of Bahamas. The country’s economy is heavily dependent on tourism, which provides an estimated 60% of GDP and employs almost half of the Bahamian work force.

In addition, campaigners have pointed out that the Bahamas itself is extremely vulnerable to the physical risks of climate change. An assessment by Moody’s found that the Bahamian economy would be among those hit hardest by rising sea levels as a result of global warming.

A group of 18 members of the US congress, led by Democrat Alcee Hastings, are also opposing the project on environmental grounds. A letter sent by the group to the Bahamian Prime Minister noted the project’s proximity to the US – 150 miles off the coast of Florida – and its parallels to the Deep Horizon disaster, another exploratory drilling operation, which devastated the Florida coastline in 2010.

According to BPC, the equipment and facilities being used to drill this well “are amongst the most technically capable in the world, and include some of the most advanced safety equipment, processes and procedures in use”. 

BPC commenced drilling at the test well in December last year and is expected to take around 60 days to complete its operations, after which the well will be permanently sealed. If successful, BPC hopes to establish production wells in the region over the coming years. 

Commenting on the story, an LOIM spokesperson said to RI: “We are aware of the situation and are engaging with the company.”

LOIM is a part of the Lombard Odier Group, which was the first global wealth manager to be awarded  B Corp status in 2019. The certification recognises leading companies which “meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose”. 

(See RI’s recent feature on B Corps here)

Insurance coverage of BPC’s operations in the Bahamas is being provided by an unknown syndicate at Lloyd’s of London in a deal brokered by Aon. LLoyd’s had previously denied that the project was underwritten in its market but confirmed its involvement earlier this week. 

Lloyd’s has pledged to cease insurance coverage for coal, oil sands and Arctic energy projects by 2030 but will still continue to underwrite conventional oil and gas projects.

UPDATE: 

LOIM has issued a second statement in response to the article:

“We regret this situation and are taking the necessary actions to address it. This investment decision was not aligned to our commitment to sustainability and our strategic investment framework.”