Activist shareholder sues Shell board over climate strategy

Activist shareholder sues Shell board over climate strategy

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Big Oil’s profits are flowing freely, but they are now facing a legal blowout.

Shell’s board was hit on Thursday by a lawsuit brought by activist shareholder ClientEarth. The lawsuit, filed in the High Court of England and Wales, argues that by failing to implement an effective climate change strategy Shell’s directors are endangering the long-term survival of the business.

The oil is back

Oil companies have had a terrific 2022, with Shell last week announcing its best annual profits in 115 years. Fellow British oil giant BP also posted record profits this week and simultaneously reneged on many of its climate promises, saying current circumstances (we’re looking at you Putin) mean it will have to cling to fossil fuels a little longer than expected.

Record profits generated by, let’s face it, human misery in Ukraine, have intensified calls for windfall taxes on oil companies, but ClientEarth has been ahead of the curve, telling Shell’s board of its intentions last March, shortly after Putin’s invasion began. But he’s not the first shareholder activist to ruffle the feathers of an oil giant:

  • In 2021, Engine No. 1, a small hedge fund, managed to land three seats on Exxon’s board of directors by convincing other much larger investors that seeking the long-term benefits of clean energy was essential for the future of the company.
  • Global climate change litigation is gaining momentum (not generated by coal). The number of climate change lawsuits doubled between 2015 and 2022 with 25% of such cases filed since 2020, according to data from the Grantham Research Institute and the Sabin Center for Climate Change Law.

“There have not been many cases to this effect in the past, and the best known (People and Planet v. HM Treasury) has made it clear that companies (and their managers) have wide discretion in the how they fulfill their obligations. So ClientEarth faces tough odds,” Professor Veerle Heyvaert, climate law expert at the London School of Economics, told the Daily Upside. “On the other hand, this case dates back to 2009 and a lot has changed in the meantime. Courts around the world are certainly taking weather-related claims much more seriously now than they were 10 years ago.

Plastic punks: ClientEarth already has some expertise regarding climate litigation. Last month, it was one of three groups to take legal action against French consumer giant Danone, famous for its yoghurt pots and bottled water empire, accusing it of nonchalant about its contribution to plastic pollution. ClientEarth has taken advantage of a relatively new French “duty of vigilance” law that requires companies to monitor and publish details of environmental and human issues in their operations. What vigilance!

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