Shell logo at a gas station in London. A court in The Hague has ordered oil giant Shell to cut its carbon emissions by 45% from 2019 levels by 2030 in what is considered a historic deal.
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Shell’s board is being sued for not preparing the multinational oil and gas company to move away from fossil fuels.
Environmental law firm ClientEarth, a Shell shareholder, said on Tuesday it had notified Shell of its lawsuit against 13 of the company’s executive and non-executive directors. It argues that the board’s failure to implement a climate strategy that is truly in line with the landmark Paris Agreement is a breach of their duties under English law.
The case is believed to mark the first ever attempt to hold a company’s board of directors personally liable “for failing to adequately prepare for the move to net zero.”
“Shell is heavily exposed to the physical and transitional risks of climate change, but its climate plan is fundamentally flawed,” said Paul Benson, a lawyer at ClientEarth.
“The longer the Board of Directors delays, the more likely it is that the company will have to turn on the handbrake sharply to remain commercially competitive and deal with the challenges of imminent regulatory changes,” Benson said.
The not-for-profit group, which has a history of winning climate-related cases, says it has notified Shell and will wait for the firm’s response before formally filing with the High Court of England and Wales for permission to file a lawsuit. .
If the court case is ultimately successful, the court could force Shell’s board of directors to align its climate strategy with the goals of the 2015 Paris Agreement. He may also claim that Shell’s board of directors is violating its legal obligations. However, if the plaintiffs lose, they may be fully liable for legal costs.
In response to the lawsuit, Shell told CNBC via email that it is pursuing its global strategy to support the Paris Agreement. This includes plans to transform its business “to provide customers with more low-carbon energy,” the company added.
The Paris Agreement aims to continue efforts to limit global warming to 1.5 degrees Celsius above pre-industrial levels by reducing greenhouse gas emissions.
Of course, it is the burning of fossil fuels such as oil and gas that is the main cause of the climate emergency.
“Tackling a problem as big as climate change requires action from all sides. The energy supply issues we are seeing underscore the need for effective government-led policies to address urgent needs such as energy security while decarbonizing our energy system,” the spokesman said. for Shell said. “These issues cannot be resolved through the courts.”
Shell shares fell 0.8% in early afternoon trading in London. The firm’s share price has risen more than 17% since the beginning of the year.
Long term interests
ClientEarth says it is acting in Shell’s best long-term interests by pursuing shareholder litigation. He argues that Shell’s board’s mismanagement of climate risk is causing its directors to violate their obligations under the UK Companies Act. This law provides that directors are required by law to contribute to the success of the firm and to exercise reasonable care, skill and diligence.
ClientEarth urged other shareholders to join the lawsuit, saying many of Shell’s largest institutional shareholders have raised concerns about the firm’s climate strategy.
At the company’s annual general meeting last year, more than 30% of shareholders voted against the board of directors in support of a resolution calling for emission targets to be set in line with Paris regulations.
Shell has faced lawsuits before over its climate strategy.
In May 2021, a Dutch court ordered the oil giant to cut its global carbon emissions by 45% by the end of 2030 from 2019 levels. It also states that Shell is responsible for its own and its suppliers’ carbon emissions, known as Scope 3 emissions.
Shell is appealing this decision.
The court case comes at a time when Russia’s attack on Ukraine caused the biggest shock to the energy market in decades, with oil prices skyrocketing to multi-year highs as international allies imposed a flurry of sanctions on Russia’s corporate and financial system.
Last month, Shell CEO Ben van Beurden called 2021 a “significant year” for the company after a recovery in commodity prices led to a surge in profits.