European environmental law charity ClientEarth is launching a legal action against colossal fossil Shell and its board of directors, and inviting other Shell shareholders to join the fight.
“We’re arguing that the board’s failure to properly manage climate risk to Shell means that it is breaching its legal duties,” ClientEarth said in a mid-March release that cast the legal action as the first of its kind. “The board has failed to adopt and implement a climate strategy that truly aligns with the Paris Agreement goal to keep global temperature rises to below 1.5°C by 2050.”
That means the Shell board “is breaching its duties under sections 172 and 174 of the UK Companies Act, which legally requires it to act in a way that promotes the company’s success, and to exercise reasonable care, skill, and diligence,” the organization contends.
“Shell is seriously exposed to the risks of climate change, yet its climate plan is fundamentally flawed,” said ClientEarth climate accountability lawyer Paul Benson. “In failing to properly prepare the company for the net-zero transition, Shell’s board is increasing the company’s vulnerability to climate risk, putting the long-term value of the company in jeopardy.”
In addition to launching the claim, ClientEarth is asking other Shell shareholders to sign on. “ClientEarth is encouraging institutional investors of Shell to support the claim, and—in line with their own fiduciary duties—to use their position to compel the board to adopt a strengthened climate strategy which sufficiently protects against financial losses resulting from climate risk,” the group states.
The Guardian points to the high stakes attached to the case. “If successful, Shell’s board could be forced by the courts to change its strategy, taking specific concrete steps to align its plan with the Paris deal,” the news story states. “But if the claimants lose, they could be liable for the full costs of the case, including directors’ legal fees.”
ClientEarth maintains it has launched the suit in Shell’s own best interest.
“It is highly novel, we’re in uncharted territory here, but we see real merit with this claim,” Benson told the Guardian. “We think, frankly, the longer the board delays with this, the more likely it is that the company is going to have to execute this sort of handbrake turn to retain commercial competitiveness, to meet the challenges of inevitable regulatory developments.”
He added that “Shell is actually really quite exposed to the risks of climate change,” both physical and transitional. “They are exposed to what we call stranded asset risk, where their assets—for example their facilities, their physical infrastructure—the value of that is just going to reduce or it will become a liability as the net-zero transition progresses. And they are exposed to massive write-downs of those assets.”
A Shell spokesperson said the company’s plan to become a net-zero emissions business by 2050 “includes the industry-leading target we have set to halve emissions from our global operations by 2030, and transforming our business to provide more low-carbon energy for customers.” But the formerly Dutch-British fossil has had a tough time backing the spin with substance. In 2019, CEO Ben van Beurden lamented the company had “no choice” but to keep on investing in new fossil exploration projects. Its February, 2021 climate plan had shareholders squirming while climate analysts declared its targets “grotesque” and “delusional”. And an October, 2021 analysis showed the company missing its net-zero goal and increasing emissions 4% through 2030.
In mid-October last year, Scottish climate campaigner Lauren MacDonald confronted van Beurden on the TED Countdown plenary stage, vowing that “we will never forget what you have done and what Shell has done” as the climate emergency became more deadly. A month later, Shell moved its head office out of The Netherlands, just months after a Dutch court ordered it to reduce its greenhouse gas emissions 45% by 2030 in a bruising court decision.
A week before ClientEarth announced its lawsuit, Shell was under a “barrage of criticism” for buying a cargo of crude oil from Russia subsequent to Vladimir Putin’s invasion of Ukraine, Bloomberg reported. As the month unfolded, the company applied for environmental assessments for 17 gigawatts of wind capacity off the coast of Brazil. But it also released a revised plan to develop the Jackdaw oil and gas field in the North Sea after UK regulators rejected its previous pitch on environmental grounds, and was considering reviving its role in the controversial Cambo development off the Shetland Islands.