Rahul Somvanshi
The oil major, Shell, is being sued by environmental lawyers, ClientEarth, over the inadequacy of the company’s climate strategy. This lawsuit, the first of its kind, has been filed against 11 directors at the high court in England and is seeking to hold corporate directors liable for the failure to prepare their company for the transition to net zero emissions. ClientEarth argues that the transition to low-carbon energy is unavoidable as governments worldwide strive to end the climate crisis and that Shell’s slowness in adapting to these changes puts the company’s future success and its investors’ money at risk. The environmental group is being supported by a group of pension funds and other institutional investors.
Shell recently announced a record annual profit of $40bn, but as climate litigation increases, the company has faced a series of recent legal and regulatory challenges. This includes a Dutch court order to reduce emissions by 45% by 2030 and allegations that the company is investing less in green energy than it claims. ClientEarth is asking the high court to order Shell’s board to adopt a climate risk management strategy in line with the Companies Act and in accordance with the Dutch court’s order to reduce emissions.
Nest, the UK’s largest workplace pension scheme, and other investors including the London local government pension scheme, French asset manager Sanso IS and Danske Bank Asset Management have backed the lawsuit. The International Energy Agency has stated that no new oil and gas projects are compatible with net zero emissions by 2050, and ClientEarth argues that Shell’s persistent investment in oil and gas projects will result in stranded assets and is not in the best interests of the company, its employees, its shareholders or the planet.
A Shell spokesperson has stated that the company does not accept ClientEarth’s allegations and that the directors have acted in the best interests of the company and in compliance with their legal duties. Shell claims that its climate targets align with the more ambitious goal of the Paris agreement and that its shareholders support the progress the company is making on its energy transition strategy, with 80% voting in favor at the last AGM.
In addition to the lawsuit from ClientEarth, Shell has faced legal challenges from Friends of the Earth over emissions, a complaint from a non-profit group with the US Securities and Exchange Commission over renewable energy spending, and a lawsuit from 14,000 people from two Nigerian communities over pollution of their water sources. Shell is also taking legal action against Greenpeace International protesters occupying its oil and gas platform.
In conclusion, the lawsuit against Shell highlights the increasing pressure on companies to take action to address the climate crisis and the growing desire of investors to see companies transition to a low-carbon economy. The outcome of the lawsuit will be watched closely as it could set a precedent for other companies facing similar legal challenges.
