Shell’s board is about to get hit with a ‘paradigm shift’ lawsuit over its failure to live up to the Paris accords

An environmental shareholder group is starting legal proceedings against the 13 directors of oil giant Shell, saying they bear individual responsibility for not cutting greenhouse gas emissions fast enough.

ClientEarth, an environmental law charity that has held shares in Shell since 2016, wants to hold Shell’s board members legally and personally accountable for failing to adopt to a strategy that truly aligns with the 2015 Paris climate agreement. ClientEarth has been a Shell shareholder for the purposes of gaining investor information and voting rights in the company.

“Shell is seriously exposed to the physical and transitional risks of climate change, yet its climate plan is fundamentally flawed,” said ClientEarth lawyer Paul Benson in a statement. He added that if the company is promising to abide to the Paris agreement when it actually isn’t, “then there is a risk of misleading investors and the market at large.”

ClientEarth says Shell’s commitments are not consistent with the Paris Agreement to stop the rise in temperature above 1.5C above pre-industrial levels and argue that if the company does not act, Shell’s directors are in breach of their obligations under the U.K. Companies Act to “act in a way that promotes the company’s success”. ClientEarth is encouraging other institutional investors to join its claim ahead of Shell’s annual meeting in May.

ClientEarth has a strong record of winning climate-related cases, winning three High Court rulings in the U.K. already where the litigation is due to take place.

And if that doesn’t worry Shell, its recent history should. In May 2021, Shell lost in a landmark ruling in the Dutch Hague court brought by Friends of the Earth and over 17,000 co-plaintiffs, where the company was accused of being partly responsible for climate change and was ordered to reduce its emissions by 45% by 2030 compared with 2019 levels.

“The longer the board delays, the more likely it is that the company will have to execute an abrupt ‘handbrake turn’ to retain commercial competitiveness and meet the challenges of inevitable regulatory developments,” said Benson.

Delayed rulings

Shell has appealed against the landmark ruling in the Dutch court, arguing that it cannot be responsible for its scope 3 emissions, otherwise known as the carbon emitted from the oil and other products it sells, particularly when governments are doing little to curb consumer demand.

Shell has instead implemented its “energy transition strategy”—committing to cutting its carbon intensity of its scope 3 emissions by 20% by 2030 and 45% by 2035, compared with a 2016 baseline but not a reduction in absolute emissions or net carbon footprint emission intensity metric, which would require the oil company to drill less oil.

According to analyst research from Global Climate Insights from last year, Shell is far from its promised 45% reduction. Under its current strategy, the analysts predict a 4% rise in net emissions by 2030.

Climate litigator Roger Cox, who led the Dutch case against Shell last year, said in the FT that the effort by a shareholder to hold board directors personally accountable was a kind of “paradigm shift” in how society views corporate responsibility for climate change.

In response to ClientEarth’s decision to litigate against other members of the board, Shell said the company was delivering on its global strategy that supported the Paris Agreement. It added “addressing a challenge as big as climate change requires action from all quarters. The energy supply challenges we are seeing underscore the need for effective, government-led policies to address critical needs such as energy security while decarbonising our energy system.”

It succinctly added, “These challenges cannot be solved by litigation.”

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