Swiss investor Lombard Odier Investment Management (LOIM) has divested an £11.25m (€12.7m) stake in an exploratory oil drilling project located in a biodiversity hotspot off the coast of the Bahamas, RI can reveal.
The move comes after the project drew condemnation from NGOs and local groups who argued that an oil spill at the project location would be catastrophic for nearby marine parks, coral reefs and ocean ecosystems, and would severely impact the country’s tourism sector which employs almost half of the Bahamian work force.
In January, RI reported that LOIM had entered into a funding agreement with the project owner – the London-listed Bahamas Petroleum Company (BPC) – in return for 562.5 million BPC shares, roughly amounting to a 12% stake in the company. If successful, BPC had hoped to establish production wells in the region over the coming years.
Lombard Odier’s involvement in the project was particularly controversial due to the wealth manager’s reputation as a sustainability leader and its status as a certified BCorp (see RI’s recent feature on B Corps here). The designation, which was awarded in 2019, recognises companies which “meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose”.
In response to the coverage, LOIM said at the time that the decision to invest in the project was “not aligned to our commitment to sustainability and our strategic investment framework”.
Now, the wealth manager has confirmed to RI that it has withdrawn entirely from the project. LOIM sources claimed that the initial decision to invest in BPC – which was made through an LOIM hedge fund focusing on UK small caps – was an unintentional oversight as the wealth manager was still in the process of integrating its sustainability framework across its alternatives business, which represents less than 3% of its total assets.
Lombard Odier is now considering new group-wide measures on sustainability controversies to prevent similar incidents in the future, and has indicated that it will expand LOIM’s tobacco, coal and unconventional oil and gas policy to cover all strategies, including hedge funds.
Commenting on the move, a statement given to RI said: “Lombard Odier is fully committed to investing for a more sustainable future. We have consistently and progressively been driving the integration of sustainability across our Group investment strategies for several years and are aligning our business strategy and portfolios with the objectives of the Paris Agreement.”
The announcement has been welcomed by campaigners and local groups. Casuarina Mckinney-Lambert, the Executive Director of the Bahamas Reef Environment Educational Foundation, said that she hoped the incident would lead to better screening processes to ensure that investors did not “inadvertently provide critical financing for any new oil drilling projects in the pristine waters of the Bahamas”.
“The Bahamas is one of the most climate-vulnerable countries in the world, and our economy is dependent on a healthy marine environment. The world is watching how large multinational companies either support or undermine climate commitments around the world through financing, insurance and other financial mechanisms,” she said.
Local campaigners have now joined up with the Insure our Future campaign which is putting pressure on the Lloyds of London insurance market to cease underwriting fossil fuel projects. It had earlier been revealed that an unknown Lloyds syndicate provided coverage of BPC’s Bahamas operations in a deal brokered by Aon, despite Lloyds initially denying its involvement.
Last week, BPC announced it had replaced its CEO and rebranded as the Challenger Energy Group, following the conclusion of its Bahamas drilling project which had failed to discover commercially-viable oil deposits. Challenger is now looking to sell off stakes in its Bahamas asset, as it focuses on increasing oil production in Trinidad and Tobago, and Suriname.