A week after Shell announced record-high profits, an activist group sued its board of directors, in a bid to hold the 11 members personally liable for the British colossal fossil’s failure to pursue an effective climate strategy.
“It’s the first such liability case against a company board and, depending on how it goes, it could make serving on an oil company board far riskier,” writes The New York Times.
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The group, ClientEarth, which is also a Shell shareholder, is suing under the United Kingdom’s Companies Act. The case contends that Shell’s failure to embrace an inevitable global transition to clean energy threatens the company’s success and “would waste its investors’ money on unneeded fossil fuel projects,” the Guardian reports.
“The thrust of ClientEarth’s lawsuit is not that Shell’s board members aren’t protecting the climate, but that they are not protecting the interests of shareholders in the long run,” explains the Times.
ClientEarth’s action is supported by a group of large pension funds and other institutional investors that also hold shares in Shell, including London CIV, which manages the assets of the London local government pension scheme, Swedish national pension fund AP3, French asset manager Sanso IS, and Danske Bank Asset Management.
Shell recently announced a staggering US$42 billion in annual profit for 2022—more than double the previous year—driven by high energy prices from Russia’s war in Ukraine, says the Times. The company’s new chief executive, Wael Sawan, has signalled that Shell would slow down its transition off fossil fuels—at a time when climate and energy researchers like the International Energy Agency have repeatedly called on fossils to end all new oil and gas development to prevent the worst impacts of climate change.
With the shift off fossils is already happening, the litigators say the Shell board is neglecting its legal duty to manage the risks of continued fossil fuel investment.
“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,” said ClientEarth lawyer Paul Benson.
“Doubling down on new oil and gas projects isn’t a credible plan—it’s a recipe for stranded assets.”
The lawsuit is not the only recent legal action facing the company. A complaint filed with the United States Securities and Exchange Commission alleges that Shell overstated its renewable energy spending and another lawsuit by two Nigerian communities claims the company is responsible for polluting their water sources. Shell itself has also taken to the courts: to appeal a Dutch court order to cut carbon emissions from its oil and gas products by 45% by 2030, and to try and end Greenpeace International’s occupation of an oil and gas platform, the Guardian says.
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