Shell BOD Sued by Shareholders
Shell’s board of directors is being personally sued over their climate strategy (or lack thereof). Claimants say it fails to meet climate targets and puts the company at risk.
Environmental lawyers ClientEarth have filed a lawsuit against the 11 directors at the high court of England. ClientEarth said it is the first case in the world to hold corporate directors accountable for failing to prepare their company for a net-zero transition.
A group of large pension funds and institutional investors support ClientEarth, which owns a token stake in Shell, as it sues Shell under the UK Companies Act. As world governments act to end the climate crisis, a global shift to low-carbon energy is inevitable, and Shell’s failure to act quickly threatens its success and would waste investors’ money on unnecessary fossil fuel projects.
The legal claim is not frivolous; it has the backing of institutional investors and pension funds who together own over 12 million Shell shares. Pension funds such as Nest – the UK’s largest workplace pension, London CIV in the UK, and Swedish national pension fund AP3 are among these investors.
“Investors want to see action in line with the risks climate change poses and will challenge those who don’t do enough to transition their business…” said a spokesperson for ClientEarth.
According to ClientEarth, Shell’s board must adopt a strategy to manage climate risk in accordance with its duties under the Companies Act and comply with a previous Dutch court order to cut emissions dramatically. The high court will now decide on ClientEarth’s claim.
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. 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 AGM.”
Shell is no stranger to controversy for their policies; in May 2021, it was ordered to cut carbon emissions by 45% by 2030 by the Dutch court. Friends of the Earth and more than 17,000 co-plaintiffs brought the case against the company, arguing that its climate targets did not go far enough and that it had known for decades about CO2’s dangerous consequences. The verdict is being appealed by Shell.
In February 2021, Shell was accused of overstating the amount it is spending on renewable energy in a complaint filed with the US Securities and Exchange Commission by a non-profit group. The London-based company, listed on the New York Stock Exchange, denied misleading investors.
January 2023, Leigh Day Law filed suit in the High Court of London against the oil giant on behalf of 14,000 Nigerian farmers who have lost their livelihoods due to oil pollution. In 2021, a Dutch court ordered Shell to compensate Nigerian farmers for the damage caused by its polluting activities.
While some of these cases are not directly related to the issue of incorrectly managing a transition to fossil fuels, they do show a pattern of callous disregard for the environment by Shell.
For decades we have known that science shows clearly the continued extraction and consumption of fossil fuels are contributing to global climate change. Publicly traded companies must follow the best possible practices to provide positive results for their shareholders, and increasingly, this requires a robust and substantiated ESG policy.
Notorious gangster Al Capone was never convicted of murder and racketeering charges, yet he died in prison. He was imprisoned on a tax evasion conviction. Maybe the best way to get big oil to begin the transition to clean energy is to hold them accountable to their own ESG policies – from within.