An advocacy group has taken legal action against Shell’s Board of directors, challenging the energy giant’s speed to shift from fossil fuels.
ClientEarth claims that the actions of Shell’s board to adequately plan for climate risks are unlawful.
Campaigners stress that Shell’s plan to move away from fossil fuels is “unreasonable” on the basis that “it 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”.
They say this puts the company’s commercial viability at risk – ClientEarth continued: “We believe this puts Shell’s Board in breach of its legal duties under the UK Companies Act to manage the climate risk facing the company.”
A Shell spokesperson said: “We do not accept ClientEarth’s allegations. Our directors have complied with their legal duties and have, at all times, acted in the best interests of the company.
“We believe our climate targets are aligned with the more ambitious goal of the Paris Agreement: to limit the increase in the global average temperature to 1.5°C above pre-industrial levels. Our shareholders strongly support the progress we are making on our energy transition strategy, with 80% voting in favour of this strategy at our last annual general meeting.
“ClientEarth’s attempt, by means of a derivative claim, to overturn the board’s policy as approved by our shareholders has no merit. We will oppose their application to obtain the court’s permission to pursue this claim.”
Joanna Ford, a commercial disputes lawyer at Cripps, told ELN: “The Board’s response will no doubt be that they are taking effective steps to manage climate risk, and are acting properly and reasonably in the steps they are taking.
“Environmental issues are becoming increasingly important to society as a whole, and I think there will be greater scrutiny by investors to ensure that companies are playing their part in addressing the climate emergency.
“This will inevitably lead to further claims by shareholder activists like ClientEarth and there is certainly scope within the existing legislation to ensure that directors are held to account for failure to take effective action.”
Laura Berry, Member of the London Solicitors Litigation Association, told ELN: “It is not yet clear whether, or how far, ClientEarth’s claim will proceed. The permission of the Court is needed to bring a claim of this nature and that is by no means a given.
“The support ClientEarth has said it has received from institutional investors is, though, testament to the fact that companies need to plan for the risks and opportunities climate change presents.
“If the case reaches trial, it should provide important guidance to directors on the scope of their duties with respect to climate change. Regardless of the way this claim proceeds, though, it is clear that Shell (and other corporations, particularly in the energy sector) can expect to come under continued fire from shareholder activists all over the world.”
