A group Shell's own investors is suing board of directors over its climate change strategy
Failure to take care of the planet is a real business risk.
A truck carrying Shell gasoline.
In a historic legal maneuver, ClientEarth is personally suing 11 of Shell’s board of directors for failing to bring its business policies in line with the Paris Agreement. The suit is the first time that a corporate board of directors has been sued due to a lack of climate action.
The Paris Agreement is a landmark 2015 international treaty to reduce global warming below 2° and, preferably, 1.5° Celcius.
ClientEarth is a Shell shareholder, giving it the right to bring a suit against the company for failure to manage the risk posed by climate change under the UK Companies Act.
“Shell’s Board is legally required to manage risks to the company that could harm its future success, and the climate crisis presents the biggest risk of them all,” ClientEarth said in a statement.
“Ensuring the company stays competitive in the energy markets of the future, as countries and customers worldwide choose cheaper, cleaner energy, means,” the statement continues. “Shell needs to move away from fossil fuels towards an alternative business model.”
The lawsuit is supported by Nest, the UK’s largest workplace pension scheme with over 10 million members. “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.”
The lawsuit has the backing of a group of investors that hold over 12 million shares in the company.
\u201cLast year, we announced the start of legal action against Shell\u2019s Board of Directors, for failing to move away from fossil fuels fast enough. \n\nAnd now, we\u2019re going to court. Read more: https://t.co/IMPaFGhX7g\u201d— ClientEarth (@ClientEarth) 1675934220
Shell believes it’s acting according to the Paris Agreement because its goal is to become a net-zero emissions company by 2050. The company says it supports the “most ambitious goal” of the Paris Agreement, limiting the global temperature rise to 1.5° Celsius.
ClientEarth says Shell should be more aggressive in moving away from fossil fuels towards an alternative business model. It also believes that the company's current efforts are inadequate and will lead to diminishing profits.
“[Shell] fails to deliver the reduction in emissions that is needed to keep global climate goals within reach and continues with fossil fuel production for decades to come,” ClientEarth said in a statement. “This will tie the company to projects and investments that are likely to become unprofitable as the world cleans up its energy systems.”
\u201c.@ClientEarth has filed a lawsuit against the Board of Directors of Shell plc for failing to manage the material and foreseeable risks posed to the company by climate change. \n\nNest is in support of this lawsuit \ud83e\uddf5\u2935\ufe0f\u201d— Nest (@Nest) 1675935535
In 2022, Shell reported its largest annual profit of nearly $40 billion, fuelled by rising energy costs due to the war in Ukraine.
“We do not accept ClientEarth’s allegations,” a Shell spokesperson said. “Our directors have complied with their legal duties and have, at all times, acted in the best interests of the company.”
While efforts to push companies to do more to solve the climate crisis tend to come from the outside, ClientEarth’s approach to sue as a shareholder is a unique way to pressure Shell to change. It also makes a lot of sense. Whether you’re a citizen of the Earth or a multinational corporation—we need to do something about climate change before it becomes impossible to do business altogether.