ClientEarth, an environmental law charity, has filed a High Court case claiming Shell’s directors failed to properly prepare for a shift away from fossil fuels and for the risks posed to the firm by climate change. David Connett discusses latest developments in an article on the inews website.
Shell directors sued in landmark climate-change court battle
Shell’s board of directors is being sued in the High Court for allegedly failing to adequately prepare the company for climate change risks.
The move, backed by investors that own shares in the oil and gas company worth £450bn, could have far-reaching implications for how companies tackle carbon emissions.
ClientEarth, an environmental law charity, filed a High Court case claiming that Shell’s 11 directors failed to properly prepare for a shift away from fossil fuels and for the risks posed to the firm by climate change.
The action claims that the directors are in breach of company law in that the board breached their duties under UK law to properly manage the “material and foreseeable” risks from climate change.
ClientEarth senior lawyer Paul Benson said: “Shell may be making record profits now due to the turmoil of the global energy market, but the writing is on the wall for fossil fuels long term.
“The shift to a low-carbon economy is not just inevitable, it’s already happening. Yet the Board is persisting with a transition strategy that is fundamentally flawed, leaving the company seriously exposed to the risks that climate change poses to Shell’s future success – despite the Board’s legal duty to manage those risks.
“Long term, it is in the best interests of the company, its employees and its shareholders – as well as the planet – for Shell to reduce its emissions harder and faster than the Board is currently planning.”
Shell has rejected this, saying its carbon-reduction targets were ambitious and on track and that its directors complied with their legal duties and acted in the company’s best interests.
“ClientEarth’s attempt… to overturn the board’s policy as approved by our shareholders has no merit,” Shell said in a statement.
British pension funds London CIV and Nest, along with Swedish pension fund AP3 and Danske Bank Asset Management, are among those supporting the claim.
The investor group collectively has around £450bn in assets under management and owns about 12 million of Shell’s seven billion shares.
London CIV said its Shell stake was a “primary hotspot of risk and exposure within our portfolio”. “We hope the whole energy industry sits up and takes notice,” said Nest’s chief investment officer, Mark Fawcett.
The action comes two years after Shell was ordered to slash carbon emissions in a landmark Dutch case. A Dutch court ordered Royal Dutch Shell to deepen planned greenhouse gas emission cuts, in a landmark ruling.
Shell, which is appealing the decision, was ordered to reduce its planet warming carbon emissions by 45 per cent by 2030 from 2019 levels.
Shell was challenged after setting out one of the oil and gas sector’s most ambitious climate strategies. It has a target to cut the carbon intensity of its products by at least 6 per cent by 2023, by 20 per cent by 2030, by 45 per cent by 2035 and by 100 per cent by 2050 from 2016 levels.”
The Dutch court concluded Shell’s climate policy was “not concrete and is full of conditions…that’s not enough.”
The legal action also comes after it was revealed that Shell paid out more than £5bn to shareholders in the fourth quarter of 2022, around five times more than its investments in renewables and energy solutions, it has been claimed following analysis of the company’s accounts.