Institutional investors are backing non-profit ClientEarth’s legal claim against individual Shell directors, the first lawsuit of its kind.
ClientEarth has filed a legal claim in the UK against 11 Shell directors, accusing them of endangering the company’s future by failing to prepare for the “material and foreseeable” climate change risk in the first-of-its-kind climate lawsuit.
The non-profit environmental law charity is asking the high court to order Shell’s directors to develop a climate risk-management strategy that is in line with 2021’s high-profile legal case, which saw a Dutch court order the company to cut its emissions by 45% by 2030 compared with 2019 levels.
“Ensuring the company stays competitive in the energy markets of the future, as countries and customers worldwide choose cheaper, cleaner energy means Shell needs to move away from fossil fuels towards an alternative business model,” ClientEarth said in a statement announcing the lawsuit.
The “unreasonable” plan for making that shift happen “fails to deliver the reduction in emissions that is needed to keep global climate goals within reach and continues with fossil fuel production for decades to come. This will tie the company to projects and investments that are likely to become unprofitable as the world cleans up its energy systems.”
Other European institutional investors – including London CIV and Nest, Belgian Degroof Petercam Asset Management, Swedish pension fund AP3, and Paris-based asset manager Sanso IS – say they back the charity’s decision. The investor group has a combined US$543 billion in assets and owns about 12 million of Shell’s 7 billion shares, according to Reuters.
The lawsuit was filed on Wednesday, just days after the multinational oil and gas company – as well as other giants including Exxon, Chevron, BP, and TotalEnergies – posted record profits for 2022, mainly driven by high energy prices due to Russia’s war in Ukraine. Despite being responsible for more than 10% of global carbon emissions since 1965, these companies recorded a combined $190 billion in profits last year.
“Shell may be making record profits now, but the writing is on the wall for fossil fuels long term,” said ClientEarth lawyer Paul Benson. “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, despite the board’s legal duty to manage those risks.”
It is the first time that shareholders have filed a suit against individual directors over the alleged failure to prepare for a green transition away from fossil fuels. If brought forward, the case could pave the way for investors in other companies to hold boards accountable for their failure in addressing climate change risks.
Featured image: Wikimedia Commons
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