Shell’s Board of Directors Personally Sued Over Response to Climate Change

What’s the story?

• The individuals on Shell’s board of directors are being sued for failing to respond to the climate crisis promptly and responsibly.
• This is the first case to hold corporate leaders personally accountable for their inadequate actions to prepare their company for a green transition, despite their awareness of the climate emergency.

What does the lawsuit say?

• The lawsuit states that the 11 directors of the oil giant have breached their legal duties under the U.K.’s Companies Act by not aligning their climate strategy with the Paris Agreement. 
• ClientEarth, the environmental law firm that filed the lawsuit, is taking 'derivative action' against Shell as a company shareholder. The lawyers argue that the world needs a global transition to low-carbon energy and that Shell is failing to move fast enough, threatening the company’s success and wasting investors’ money.
• The lawsuit is backed by institutional investors that, combined, have over 12 million shares in the company and more than half a trillion dollars in total assets. Paul Benson, a senior lawyer at ClientEarth, said in a statement: 

“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’s actions

• Shell recently reached a record annual profit of $40 billion — over double the earnings from 2021 — mainly due to the high energy prices from the Russia-Ukraine war. The lawsuit argues that these funds should be going toward green energy projects. 
• As stated by Benson, the International Energy Agency declared in 2021 that any new oil and gas projects are incompatible with Shell’s goal of reaching net zero emissions by 2050. Despite this warning, the company has expanded its oil and gas investments.
• In 2021, Shell said it planned for 12% of its capital expenditure to go towards “renewable and energy solutions.” Upon further investigation, the climate group Global Witness found that a significant portion of this spending went to investments in natural gas, a fossil fuel. In contrast, around 1.5% of Shell’s expenditure went to wind and solar electricity projects. 
• Various groups have lodged complaints that Shell is misleading investors, which the company denied. To this, Benson said: 

“Doubling down on new oil and gas projects isn’t a credible plan - it’s a recipe for stranded assets.”

• In response to the lawsuit, a Shell spokesperson said: 

“We do not accept ClientEarth’s allegations. Our directors have complied with their legal duties and have, at all times, acted in the best interest of the company…Our shareholders strongly support the progress we are making on our energy transition…”

Should we hold the directors of oil giants personally responsible for climate change?

-Jamie Epstein

(Photo credit: iStock/coldsnowstorm)