Environmental law charity ClientEarth has filed a lawsuit against the board of directors of Shell over a “flawed” climate strategy. According to the case, the oil major’s 11 directors have failed to comply with their legal duties to keep the company’s climate strategy in line with the Paris Agreement.
ClientEarth said this is a first-of-its-kind lawsuit, as it holds corporate directors personally accountable for failing to prepare for the energy transition.
“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,” said Paul Benson, a senior lawyer at ClientEarth. “The shift to a low-carbon economy is not just inevitable, it’s already happening.”
Shell’s board of directions keeps insisting on a “fundamentally flawed” transition strategy, Benson said, adding that this leaves the British oil giant exposed to the risks that climate change poses for the company’s future success.
ClientEarth filed the world’s first such climate case at the High Court of England and Wales in its shareholder capacity. The lawsuit also has the support of investors and pension funds that own a total of over 12 million of Shell’s seven billion shares. Among those investors are UK’s pension fund Nest, London CIV, and Swedish pension fund AP3.
In a letter to the board of directors, the environmental law charity told them the lawsuit was in the “best interests” of the company and investors.
“Investors want to see action in line with the risk climate change presents and will challenge those who aren’t doing enough to transition their business,” said Mark Fawcett, Nest’s chief investment officer. “We hope the whole energy industry sits up and takes notice.”
A Shell spokesperson said its directors have complied with their legal duties and that the company does not accept the ClientEarth allegations and will oppose “their application to obtain the court’s permission to pursue this claim.”
Shell said its Energy Transition Strategy, which includes a target to reach net zero by mid-century, complies with the Paris Agreement. According to the company, its plan to halve its emissions by the end of this decade is “industry-leading.”
However, ClientEarth claims that the strategy only covers less than 10% of the company’s total emissions and that independent assessors have found the strategy does not align with the Paris Agreement.
The charity has asked the high court to order Shell to adopt a strategy that is consistent with a legal order by Dutch courts from 2021 to decrease emissions by 45%.