All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.
Back in 2019 the Global Carbon Project, a cooperative of world scientists, estimated that human-derived emissions of carbon dioxide amounted to 43 billion tonnes. Of this, 20 per cent was absorbed into the ocean (warming and acidifying it in the process), 30 per cent into land and vegetation, leaving 50 per cent to accumulate in the atmosphere. It was the steady accumulation of this industrial pollution that had pushed atmospheric CO2 to 414 parts per million (ppm) versus the average for the previous 1 million years of only 220ppm1.
Step forward, it’s now the 2050s. We’ve achieved net zero: our annual emissions of carbon dioxide and methane are back in balance with the capacity of nature – land, trees, oceans – to absorb them.
Some things about the net zero future are clear. One is that the world in the 2050s is highly electrified. This has enabled us to make use of renewable generation to displace fossil fuels: electricity now meets around half of our end-use energy consumption, a doubling from 2020 levels. In addition, even more of us live in cities: perhaps 70 per cent – an extra two billion – are now urban dwellers. We’re also even more resource efficient, not only per capita, but absolutely. As a result, we need fewer primary resources to meet our wants and needs2. This transition has been enabled by pervasive digital connectivity and data analysis. Less positively, we’ve failed to stem the increase in global temperatures fast enough. At plus 2°C above where we were in the pre-industrial period, our water levels are higher, and a warmer, more energetic weather system delivers more extremes. We’ve had to adapt our locations and our lifestyles. There’s a huge industry recapturing atmospheric CO2 or neutralising its greenhouse effect through effective land management.
Beyond this, there are other things we should perhaps expect as we look forward to this net zero world but can be less certain about. The cost of carbon will have risen – both through direct taxes and regulation limiting its emission – but we don’t know whether this will have happened gradually, or through a late, dislocating government reaction. Will we be eating less meat, substituting vegetable or lab-grown alternatives, or will we just have intensified our animal rearing? Will our abundant renewable electricity system be balanced by batteries and smart meters, or will hydrogen have emerged as a massive new energy vector linking both points of production and time of use? Will transportation between regions and across continents have gone low carbon and continued to boom, or will video-links, virtual reality and 3D printing have optimised efficiency?
Back to the right now, March 2021. The Paris Agreement of December 2015 was a huge achievement, but it failed to mark the step-change in global policy needed for rapid emission reduction. Just over five years later, there remain many barriers, from plain inertia to outright denial, but there is also unprecedented awareness among politicians, companies and ordinary folk around the world. The US Presidential election, Europe presenting its post-Covid Green Deal and China aiming for a carbon neutral 2060 feel like major inflection points. So how are we, as managers of Sustainable Growth responding to this challenge of supporting the energy transition?
First, we try to do our homework.
At its root, global warming is just a pollution problem. As a species, we’ve solved many such issues – mostly by bringing the pollutant inside the economic system. In the jargon, we’ve stopped the free riders from damaging public goods. The trick with this particular challenge is that cause and effect are distant over time and geography, and it demands a total reconfiguration of our system of energy inputs and the way we use them. Tie that up with numerous, well-entrenched vested interests and you have our current predicament.
As investors, we can start by understanding what needs to change, what that net zero world will likely look like, and what we will need more or less of. We must work to support a freely flowing competitive, market-led response. We need to think long term, be prepared to back innovation, and engage to encourage the reallocation of capital. We also need to recognise that the complexity of the transition will throw up anomalies. Sometimes ‘green’ products and services will look expensive, sometimes the ‘black’ will look cheap. We need to be clear about our investment framework to navigate this volatility. And while, for us in Sustainable Growth, that means a fundamental, long-term view, it also must, for now, include a commitment to fossil fuel exclusion.
Second, we must focus on corporate governance – principally management, disclosure and alignment. On management, this does not mean demanding that one outfit suits all seasons. For the purposes of the energy transition there are perhaps just two sorts of companies: innovators and incumbents. For the latter, engaging to ensure board diversity, independent thinking and scenario planning are critical. Best practice corporate governance should maximise the chance of these companies preparing for and supporting change. For the innovators creating the transformational new products and processes, different styles of governance may be optimal. We are backing a founder-based model generating unrivalled solutions for a net zero world at Tesla, but also in the upstarts bringing the democratisation of digital productivity tools, such as Zoom and Twilio. Here, we’re not using our engagement to change their internal structures (yet!), but as a critical friend bringing independent thought to the social and organisational challenges growth brings to these businesses.
For all companies, we push for the disclosure of relevant metrics, applying the adage that you can’t change what you don’t measure. Enormous progress has been made in the reporting of direct emissions (scope 1 and 2) in recent years: over 70 per cent of companies in the MSCI All Countries World Index (ACWI), by weight, are now classified as reporters. This is important, even where emissions are not at first glance material, as all the data can add to a better understanding of the loci of carbon across the economy. In Sustainable Growth, our exposure to some smaller companies and emerging markets means that our portfolio is a comparative under-reporter. That means we need to take on our responsibility to be that player in the financial system that asks for more. We will make it clear to all our holdings that the reporting of their own direct emissions is a minimum expected standard. In parallel, we are trying hard to add to the sum of knowledge on full value chain (or scope 3) emissions. This requires bespoke work with consultants and academics as well as the companies, but is critical to a holistic view of carbon-related financial risk and opportunity.
We are also alert for misalignment between external statements and internal actions. This could be one set of assumptions for oil or carbon pricing in strategy presentations, but another for internal project sanction or book values. It could be membership of industry associations that work against climate policy, or excessive political donations seeking to distort the democratic process. We must push for enhanced lobbying disclosure by companies and, where necessary, through regulatory intervention.
In sum, across the portfolio, our engagements are typified by responsibility in reporting and disclosure for all, stretching to complex conversations about strategic alignment and a drive for the most material contributions any company can make. We track our activity through regular portfolio reviews, and report back through our quarterly updates.
Sustainable Growth climate policy
Integrated investment analysis seeking companies for which the energy transition is a tailwind for growth, and those demonstrating leadership in climate-related mitigation.
Engagement to shape strategic awareness, improve governance, promote disclosures, and encourage corporate leadership.
Providing transparency in reporting: benchmarking portfolio carbon emissions; the status of company reporting and targets; physical risks exposures; our engagement activity.
Aiming for further improvement in our ability to make portfolio-wide commitments and to develop metrics that illustrate the positive alignment of companies to climate solutions.
The third leg – and for us as active investors, the most dynamic of our actions – is to be as strong as we can in supporting innovation. Positive capital allocation will, we believe, be even more powerful than simple carbon risk management. While not a climate-driven fund per se, Sustainable Growth’s hunt for sustainable growth companies brings natural alignment with solutions providers, and this is reinforced by our Positive Inclusion Factors. As detailed below, three questions guide our stock selection, and when set against our expectations for a successful, low carbon 2050 world, pretty clearly tilt the resulting portfolio.
Positive inclusion factors – climate
Sustainable Growth investment research incorporates three Positive Inclusion Factors: questions which guide our efforts to identify sustainable growth companies. The Positive Inclusion Factors also provide a clear and helpful framework for considering climate issues.
- Will the company add value for society in the long run?
We expect the products delivered by portfolio holdings to make a clearly supportive contribution to the necessary shift to a low-carbon economy. In cases where this is not a material issue, we still expect management to demonstrate leadership in climate-related reporting and mitigation. - Does it balance the needs of all stakeholders?
The environment is the silent stakeholder, yet its long-term health supports all others. For almost all companies, we look for strategic awareness of their climate responsibilities and of the implications of the energy transition. A thoughtful and constructive approach to the treatment of customers, staff and suppliers is a potential source of competitive advantage – the consideration of climate is no different. - Does the company exhibit a culture of responsible business?
We encourage leadership in climate-related awareness and reporting, and advocate for the use of industry standards such as the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and Carbon Disclosure Project (CDP)-style disclosures. We expect transparency and accountability in lobbying, political donations and the membership of trade associations. Most importantly, we expect climate-related ambitions and targets which reflect an appropriate, material contribution from each company.
As we hunt for these innovators, we must adopt an open-minded approach across industries and geographies. Such is the uncertainty and unpredictability of the transition that finding the right management and culture to lead change may be more important in the long run than an apparently obvious product today. Moreover, decarbonisation is a systemic event, so companies that support aligned financial infrastructure (such as MarketAxess or AIA) or commercial platforms (including Shopify or JD.com), are needed alongside the makers of kit (among them NIBE and Samsung SDI).
Some innovators will require investor patience as they prepare and then accumulate market share (Tesla, Zoom and Ocado are good examples). They may also disrupt existing businesses and patterns of employment. While socio-political systems will need to adjust for these changes, we may need to engage with our holdings to ensure they reinvest in the societies that support them (as illustrated by Baillie Gifford’s various discussions with Amazon on working conditions, tax and climate). If companies don’t recognise and address these issues head on, they (and their innovations) may be undermined by excessive regulatory responses, or a basic loss of customer trust and goodwill. The issue-critical examples of this are big data and connectivity. Both are vital to deep electrification and leaps in energy efficiency, but both challenge privacy and competitive markets. These twin strands inform our work and engagement with companies such as Alphabet and Alibaba.
Based on the Sustainable Growth portfolio as at 31 December 2020
Just as with full chain emissions reporting, we have a role to play in helping the financial system better identify the solutions providers and transition accelerators. There are helpful initiatives, such as the EU Taxonomy and the proliferation of agencies that seek to map company activities to the UN’s Sustainable Development Goals. However, this potential for positive alignment is almost certainly too complex and too future-dependent to be anything but ultimately a question of investor judgement. All three of our Positive Inclusion Factors favour transition alignment, and we will show as much useful data as we can to illustrate the potential in the portfolio that results from this work.
Fourth, we need to encourage capital reallocation at portfolio incumbents. There are stalwarts of the existing economy that have the capital and (potentially) the know-how to build the products to take us to net zero. We invest in companies that have recognised this opportunity: TSMC, Fanuc, NVIDIA, Bridgestone, and Kubota to name just a few. We are on the look-out for more holdings that could play this role. Right now, we don’t (and can’t, given our current exclusions) hold Big Oil, but we are well aware of the positive role this sector could play in accelerating the transition were it to redirect its finances, relationships and people to the task. Such a change would not be simple. It probably also demands that these companies shrink a bit first, but that doesn’t stop us from keeping an eye out for the right approach and the right management team.
It’s among the incumbent group that we have to work hardest to identify the unexpected impacts of a rising cost of carbon. The first round of corporate climate disclosures has given us a measure of direct carbon footprints, but this metric is far too narrow. If not used intelligently, it can lead to conclusions that are just plain wrong: many ‘climate aware’ index funds have been tripped up by the fact that ExxonMobil has a very low direct carbon footprint!
As noted previously, good analysis requires that we go beyond a company’s own direct emissions. We need to understand where in the value chain companies encounter carbon. Is it upstream in supplied goods which may generate rising input costs (hence Apple’s work to reduce the carbon intensity of the aluminium used by its iPhone manufacturers)? Is it downstream, where customers will switch to products that are lower carbon in use or disposal? This is clearly to the disadvantage of the auto manufacturers relative to Tesla, but it’s an issue we have to keep front of mind at retailers of high-volume fashion or furniture (where we hold Zalando and Wayfair, both of whom we are engaging with on sustainability in their supply chain).
This holistic thinking also enables us to keep challenging companies to make the most material strategic contribution possible to a timely transition. Both Amazon and Alphabet are doing good work on their direct and upstream emissions, but we think their influence could extend much further. Both can shape the information streams about the products we choose to buy, and both have emerging capability to help us be more energy efficient and time-flexible in our electricity consumption (through tools such as Alexa and Nest).
The big physical supply chains of conventional companies will also be intrinsically more exposed to the actual changes in weather and water levels, as will lenders and insurers we hold such as First Republic, AIA or HDFC Life. We need to make sure that management teams are anticipating these threats and communicating with their stakeholders on adaptation. To encourage best practice, we look for examples of leadership (TSMC’s physical reporting stands out), and we invest in research from climate and environmental specialists.
Finally, we need to try do what’s right ourselves. Closest to home, that means stretching Baillie Gifford’s own environmental initiatives: our current targets include 200 per cent annual carbon offsetting and a 50 per cent reduction in emissions per employee by 20253. With companies such as Microsoft setting ever higher goals, we shouldn’t be satisfied with our efforts to date. In our core business, we need to reinforce the efforts of regulatory initiatives such as the TCFD, contribute to industry-wide research and keep improving our portfolio-wide commitments and communication. Fundamentally, we support the positive potential of innovation and competitive markets. This needs effective policy to bring carbon pollution into the economic system: carbon pricing looks like an essential part of that market-led tool kit for net zero innovation.
Task Force on Climate-related Financial Disclosures
The TCFD recommendations are a relatively new but widely supported approach to assessing and addressing the challenges of climate change. The four pillars provide a very useful framework. We encourage our holdings to apply this to their businesses, and to engage with regulators and owners to further the evolution of assessment and disclosure. As a starting point, and subject to further work and refinement over time, Sustainable Growth’s approach can be mapped to the TCFD recommendations as summarised below.
Governance
Responsibility for climate-related analysis is shared across the Sustainable Growth Team, with formal oversight by Caroline Cook as Head of Climate Change.
Strategy
Sustainable Growth is a sustainable growth fund. We consider climate risk and opportunity for all potential holdings, and formally exclude investments in companies involved to a significant degree in fossil fuel extraction. Moreover, businesses which show leadership in managing their climate impact and supporting the transition to a low carbon economy are more likely to meet our criteria and this will be a factor in buy/sell and position sizing decisions.
Risk Management
The portfolio will be assessed for climate risk and opportunity using a variety of metrics, for example, company-level carbon footprints, potential exposure to physical damage, reporting, targets, business mix and corporate strategy. Detailed analysis and engagement follows as a result of this work, as well as our wider aim to promote best practice.
Metrics and Targets
Sustainable Growth monitors and reports its emissions, physical exposures, transition alignment and engagement priorities. Sustainable Growth portfolios are already consistent with the EU-defined ‘Paris-Aligned’ carbon intensity benchmarks4.
Quantifying climate exposures
We’ve discussed thus far our approach to decarbonisation and the energy transition. Supporting efforts to mitigate climate change forms a core part of our stock selection, and requires in-depth analysis of the risks and opportunities within each business model.
In this section, we share a range of metrics that provide some insight into the climate-related characteristics of the portfolio: relative carbon intensity, indicative physical risk, and transition alignment. We start with the direct greenhouse gas (‘carbon’) footprint. This measures what are known as scope 1 and 2 emissions (produced directly by a company’s activities or related to the electricity it consumes) and sets the total against corporate enterprise value (including cash). This can then be compared with the emissions intensity of our performance benchmark (the MSCI ACWI). We have also started to monitor this relative to the definition of Paris-aligned indices set in 2020 by the EU. As detailed below, that begins with a scope 1 and 2 intensity set at half of the relevant parent index.
These direct metrics are really too narrow to offer a genuine indicator of winners and losers in the years ahead. They do, however, provide a useful first pass in terms of the portfolio’s exposure to big direct carbon emitters. It identifies those companies for whom explicit emissions reduction targets are an absolute priority and gives us a starting point for initial engagement.
While our direct footprint is a mere 12 per cent of the MSCI ACWI, we do hold a small number of businesses that we would consider to be ‘carbon intensive’. However, we are comfortable that these holdings are in sectors that we believe are essential across the economy, and where management teams are working hard to minimise the carbon intensity of their business models. Our top three holdings by direct emissions intensity are Samsung SDI, Bridgestone and DENSO. Each of these is producing the components (such as batteries, tires, EV parts) required for improved energy efficiency and resource productivity. Each one is making progress in terms of increasing its use of renewable energy, and we will continue to encourage an acceleration of this process.
Direct emissions intensity
Scopes 1 and 2 only (tCO2e/$EVIC)
Source: Baillie Gifford & Co and MSCI data. As at 31 December 2020.
*The EU has set a defined standard for the emissions intensity of Paris-aligned benchmarks. This begins with the exclusion of most fossil fuel related activities and a 50 per cent lower emissions intensity than the parent. The standard incorporates only scope 1 and 2 at this stage. This bar approximates that standard relative to the MSCI ACWI.
More interesting for us as investors is the exposure of our holdings to emissions all along the value chain. These indirect emissions are known as scope 3. They occur upstream in product creation and downstream in product use and disposal. An increasing cost of carbon will impact the margins along this chain, and we need to understand how our holdings will be impacted by this: can they mitigate by shifting sources and processes; could they pass on costs to consumers; or might they see margin expansion or contraction as a result? Scope 3 also tells us about the capacity for influence. Huge volumes of goods pass, for example, through the ecommerce platforms. These companies can give us, as consumers, the information to help guide our purchase choices in terms of carbon intensity.
Unfortunately, scope 3 disclosures are not uniform – not just because of insufficient data, but because there’s no clear agreement on where in a supply chain to stop counting. We continue to spend time evaluating information on these emissions, and in 2020 had many conversations with both large data providers and individual academic consultants. For now, we have chosen to illustrate our full chain emissions exposure using the figures provided by MSCI. While still sector-based and not sufficient for granular stock selection, we consider it the best of the broad tools and useful for directing further research. Their data allows us to demonstrate that the Sustainable Growth scope 1–3 footprint sits just below the ambitious MSCI Paris Aligned Benchmark (set in May 2020 at 50 per cent of the MSCI ACWI, and declining at 10 per cent/year thereafter).
Emissions intensity across the value chain
Scope 1–3 (tCO2e/$EVIC)
Source: Baillie Gifford & Co and MSCI data. As at 31 December 2020.
**MSCI has created a Paris-aligned benchmark that builds on the EU definition. It includes MSCIís estimated Scope 3 dataset; while this lacks company-level accuracy it is useful for indicative reference. Intensity calculations reflect the actual valuations of the constituents at 31 December 2020, not the inflation-adjusted data used for underlying index construction.
Risk management also requires that we examine the potential exposure of our companies to the physical realities of climate change: flooding, storms and chronically higher temperatures. While some companies are providing information on this (and we engaged with a number of our exposed financial sector holdings on this point in 2020), we are beginning to use consultant data as a research flag for investigating the type and extent of exposure across the portfolio. Analysis of asset and market-level impacts has been pioneered by the world’s insurers, but is increasingly available to the wider market. The graphic below illustrates one attempt at quantifying the potential for value loss were temperatures to add more than 3°C this century – useful not as a number in itself (it’s almost certainly too small) but as an indicator of relative risk.
Assessing physical climate risk (percent impact on corporate value)
Source: MSCI Screener; aggressive physical risk scenario
Thanks to new modelling from CDP and the WWF5, we can also share the progress our companies are making towards best practice reporting and net zero-aligned commitments. There are other tools available that estimate temperature alignment for portfolios, but they remain top-down and data constrained. The CDP/WWF tool takes actual company data and commitments reported to CDP and the Science-Based Targets Initiative and calibrates for comparability. While the scores show just how far we have all yet to go market-wide, it is good to see that four of our companies are already certified with commitments ambitious enough to be aligned to a temperature increase of less than 1.5°C. While as a proportion this is 50 per cent more than you’d find across the MSCI ACWI, it’s still too few. We’re hopeful that the CDP/WWF annual update due out shortly will demonstrate that more of our companies committed across 2020, but meanwhile we use detailed information such as this to guide our engagement discussions.
Last, given our overarching aim in Sustainable Growth to allocate capital for sustainable growth and positive solutions, the data we would most like to show would capture the innovative products and processes the companies we hold are bringing to make a low-carbon world possible. More than any other, however, that judgement is qualitative. It needs not just discovery, but management drive and determination. We think our companies have that – from Tesla and NIBE, to Alphabet and Meituan. We are seeking authentic metrics to illustrate such characteristics, but have yet to find a simple solution that beats our idea generation and Positive Inclusion Factors. One external attempt is the MSCI Low Carbon Transition Score6. As shown in the graph, Sustainable Growth companies generate a positive bias on this metric compared to the MSCI ACWI – and we would hope that among those currently scoring mid-range we’ve identified those with the managements to drive for the future.
MSCI low carbon transition score: Sustainable Growth companies vs the MSCI ACWI
Source: Baillie Gifford & Co, MSCI Screener
How those managements can influence for a climate positive outcome is encapsulated in the diagram that follows. Here, we’ve split the companies across their various categories of potential impact – and set that against both the overall carbon footprint and portfolio weight. At one end are those for whom climate may not be central, or even tangential to the business case, so the contribution may just be one of simple reporting: deliver best practice on emissions disclosure and energy management. For another group, there is much they can offer in the realms of promoting factual information (Alphabet or Chegg) or influencing commerce (Amazon) and finance (AIA), or demand for green tech (electric vehicles at Lyft and JD.com). Then there are those who through their products and processes can clearly enable energy efficiency, the displacement of high-carbon processes or aid climate adaptation. Identifying these areas of material influence – and engaging to encourage leadership and transparency – is at the root of our process in Sustainable Growth.
1. Over the 50 years 1970–2020, the atmospheric CO2 concentration figure has increased from 325ppm. Excess methane from fossil fuels and agriculture (especially cows) is the other largest contributor to the greenhouse effect. Its volume is also booming, and it’s a yet more aggressive warming gas. However, unlike CO2, it degrades naturally, making it an important target for immediate reduction.
2. The UK is estimated to have passed peak resource intensity on an absolute basis (even adjusted for imports) in the early 2000s.
3. Read Baillie Gifford’s full Environmental Policy here.
5. https://www.cdp.net/en/investor/temperature-ratings/cdp-wwf-temperature-ratings-methodology
6. This score from 0 (worst) to 10 (best) is based on a multi-dimensional assessment by MSCI ESG Research. The scores are determined by a combination of each company’s current risk exposure and its efforts to manage the risks and opportunities presented by the low-carbon transition.
Risk factors
The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication was produced and approved in March 2021 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.
Potential for profit and loss
All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.
This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.
All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.
The images used in this communication are for illustrative purposes only.
Important information
Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.
Baillie Gifford Overseas Limited provides investment management and advisory services to non-UK Professional/Institutional clients only. Baillie Gifford Overseas Limited is wholly owned by Baillie Gifford & Co. Baillie Gifford & Co and Baillie Gifford Overseas Limited are authorised and regulated by the FCA in the UK.
Persons resident or domiciled outside the UK should consult with their professional advisers as to whether they require any governmental or other consents in order to enable them to invest, and with their tax advisers for advice relevant to their own particular circumstances.
Financial intermediaries
This communication is suitable for use of financial intermediaries. Financial intermediaries are solely responsible for any further distribution and Baillie Gifford takes no responsibility for the reliance on this document by any other person who did not receive this document directly from Baillie Gifford.
MSCI Legal Disclaimer
Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indexes or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.
Europe
Baillie Gifford Investment Management (Europe) Limited provides investment management and advisory services to European (excluding UK) clients. It was incorporated in Ireland in May 2018. Baillie Gifford Investment Management (Europe) Limited is authorised by the Central Bank of Ireland as an AIFM under the AIFM Regulations and as a UCITS management company under the UCITS Regulation. Baillie Gifford Investment Management (Europe) Limited is also authorised in accordance with Regulation 7 of the AIFM Regulations, to provide management of portfolios of investments, including Individual Portfolio Management (‘IPM’) and Non-Core Services. Baillie Gifford Investment Management (Europe) Limited has been appointed as UCITS management company to the following UCITS umbrella company; Baillie Gifford Worldwide Funds plc. Through passporting it has established Baillie Gifford Investment Management (Europe) Limited (Frankfurt Branch) to market its investment management and advisory services and distribute Baillie Gifford Worldwide Funds plc in Germany. Similarly, it has established Baillie Gifford Investment Management (Europe) Limited (Amsterdam Branch) to market its investment management and advisory services and distribute Baillie Gifford Worldwide Funds plc in The Netherlands. Baillie Gifford Investment Management (Europe) Limited also has a representative office in Zurich, Switzerland pursuant to Art. 58 of the Federal Act on Financial Institutions (‘FinIA’). The representative office is authorised by the Swiss Financial Market Supervisory Authority (FINMA). The representative office does not constitute a branch and therefore does not have authority to commit Baillie Gifford Investment Management (Europe) Limited. Baillie Gifford Investment Management (Europe) Limited is a wholly owned subsidiary of Baillie Gifford Overseas Limited, which is wholly owned by Baillie Gifford & Co. Baillie Gifford Overseas Limited and Baillie Gifford & Co are authorised and regulated in the UK by the Financial Conduct Authority.
Hong Kong
Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 is wholly owned by Baillie Gifford Overseas Limited and holds a Type 1 and a Type 2 license from the Securities & Futures Commission of Hong Kong to market and distribute Baillie Gifford’s range of collective investment schemes to professional investors in Hong Kong. Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 can be contacted at Suites 2713–2715, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. Telephone +852 3756 5700.
South Korea
Baillie Gifford Overseas Limited is licensed with the Financial Services Commission in South Korea as a cross border Discretionary Investment Manager and Non-discretionary Investment Adviser.
Japan
Mitsubishi UFJ Baillie Gifford Asset Management Limited (‘MUBGAM’) is a joint venture company between Mitsubishi UFJ Trust & Banking Corporation and Baillie Gifford Overseas Limited. MUBGAM is authorised and regulated by the Financial Conduct Authority.
Australia
Baillie Gifford Overseas Limited (ARBN 118 567 178) is registered as a foreign company under the Corporations Act 2001 (Cth) and holds Foreign Australian Financial Services Licence No 528911. This material is provided to you on the basis that you are a ‘wholesale client’ within the meaning of section 761G of the Corporations Act 2001 (Cth) (‘Corporations Act’). Please advise Baillie Gifford Overseas Limited immediately if you are not a wholesale client. In no circumstances may this material be made available to a ‘retail client’ within the meaning of section 761G of the Corporations Act.
This material contains general information only. It does not take into account any person’s objectives, financial situation or needs.
South Africa
Baillie Gifford Overseas Limited is registered as a Foreign Financial Services Provider with the Financial Sector Conduct Authority in South Africa.
North America
Baillie Gifford International LLC is wholly owned by Baillie Gifford Overseas Limited; it was formed in Delaware in 2005 and is registered with the SEC. It is the legal entity through which Baillie Gifford Overseas Limited provides client service and marketing functions in North America. Baillie Gifford Overseas Limited is registered with the SEC in the United States of America.
The Manager is not resident in Canada, its head office and principal place of business is in Edinburgh, Scotland. Baillie Gifford Overseas Limited is regulated in Canada as a portfolio manager and exempt market dealer with the Ontario Securities Commission (‘OSC'). Its portfolio manager licence is currently passported into Alberta, Quebec, Saskatchewan, Manitoba and Newfoundland & Labrador whereas the exempt market dealer licence is passported across all Canadian provinces and territories. Baillie Gifford International LLC is regulated by the OSC as an exempt market and its licence is passported across all Canadian provinces and territories. Baillie Gifford Investment Management (Europe) Limited (‘BGE’) relies on the International Investment Fund Manager Exemption in the provinces of Ontario and Quebec.
Israel
Baillie Gifford Overseas Limited is not licensed under Israel’s Regulation of Investment Advising, Investment Marketing and Portfolio Management Law, 5755-1995 (the Advice Law) and does not carry insurance pursuant to the Advice Law. This material is only intended for those categories of Israeli residents who are qualified clients listed on the First Addendum to the Advice Law.
Ref: 79725 10000558
