Shell Board of Directors Sustain Lawsuit by Environmental Firm Shareholder over Climate Strategy

Shell’s Board of Directors has been served a lawsuit by one of the company’s shareholders, ClientEarth, over climate-related issues. The Shell climate lawsuit alleges 11 members of the oil giant’s Board mismanaged climate risk. In addition, the first-of-its-kind suit also accused the Board of breaching company law in its failure to implement an international treaty-friendly energy transition strategy. According to environmental law firm ClientEarth, Shell’s Board’s stance does not align with the 2015 Paris Agreement.

Filed at the high court of England and Wales today, the Shell climate lawsuit could have far-reaching implications regarding other companies’ emission-cutting strategies. The reason, in part, is that the suit is the first in the world that seeks to hold a company’s Board accountable for its energy transition actions. So far, ClientEarth’s legal proceedings against Shell have the backing of institutional investors holding more than 12 million shares in the company.

In a statement, ClientEarth senior attorney Paul Benson explained:

“Shell may be making record profits now due to the turmoil of the global energy market, but the writing is on the wall for fossil fuels long term.”

Commenting on the oil giant’s Board’s failure to prepare for the energy transition adequately, Benson also added that “the shift to a low-carbon economy is not just inevitable, it’s already happening. Yet the Board is persisting with a transition strategy that is fundamentally flawed, leaving the company seriously exposed to the risks that climate change poses to Shell’s future success – despite the Board’s legal duty to manage those risks.”

Shell Rebuffs Climate Lawsuit Claims

However, a Shell spokesperson rebuffed ClientEarth’s allegations, saying:

“Our directors have complied with their legal duties and have, at all times, acted in the best interests of the company.”

The spokesperson further explained that the environmental law firm’s attempt to overturn the Board’s shareholder-approved policy lacks merit. According to the Shell spokesperson, the oil major will oppose ClientEarth’s “derivative claim,” which seeks the court’s backing.

In conclusion, Shell opines that its climate targets align with ‘Paris’ en route to becoming a net-zero emissions venture by 2050.

Meanwhile, ClientEarth countered Shell’s climate claims as untrue, citing third-party assessments as proof. According to the London-based environmental law charity, Shell’s strategy lacks time-scaled targets to remove emissions from its saleable products. ClientEarth further stated that these toughest carbon emissions, known as Scope 3, account for over 90% of the oil major’s overall emissions.

The plaintiff makes it clear that Shell’s emission policies contravene the Paris Agreement’s aspirational goal of pursuing global heating limitations. This environmentally beneficial strategy includes cutting back on greenhouse gas emissions by limiting global heating to 1.5 degrees Celsius beyond pre-industrial thresholds.

Record Year of Earnings

Shell’s climate lawsuit comes on the heels of the company’s stellar 2022 full-year outing, where it raked in a record $40 billion profit. This sum comfortably surpassed Shell’s previous annual record of $28.4 billion in 2008, with CEO Wael Sawan describing 2022 as a “huge year”.

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