Shell directors indicted for landmark climate action

The Supreme Court has sued Shell’s board of directors for allegedly failing to prepare the company for the risks of climate change.

The move, backed by investors who own stakes in the £450bn oil and gas company, could have far-reaching implications for how companies manage carbon emissions.

ClientEarth, an environmental charity, has filed a complaint in the High Court alleging that Shell’s 11 directors failed to adequately prepare for moving away from fossil fuels and the risks climate change poses to the company.

The lawsuit alleges that the directors violated company law by allowing the board of directors to fail to meet their obligations under UK law to properly manage “material and foreseeable” climate change risks.

Paul Benson, general counsel at ClientEarth, said: “Shell may be making record profits now amid the global energy turmoil, but the long-term outlook is on the line.

“The transition to a low-carbon economy is not only inevitable, it is already underway. However, the board is pursuing a fundamentally flawed transition strategy that leaves the company highly exposed to climate change risks to Shell’s future success, despite the board’s statutory duty to manage those risks.

“In the long term, it is in the best interest of the company, its employees and shareholders – and the planet – that Shell cut its emissions harder and faster than the Board of Directors is currently planning.”

Shell denied this, saying its carbon reduction targets are ambitious and on track, and its directors are meeting their legal obligations and acting in the best interests of the company.

“ClientEarth’s attempt … to override shareholder-approved board policy is unfounded,” Shell said in a statement.

British pension funds London CIV and Nest, as well as Swedish pension fund AP3 and Danske Bank Asset Management, are backing the lawsuit.

The investor group collectively manages around £450bn of assets and owns approximately 12m of Shell’s seven billion shares.

London-based CIV said its stake in Shell is “the main point of risk and impact in our portfolio.” “We hope the entire energy industry takes notice,” said Mark Fawcett, chief investment officer at Nest.

The action takes place two years after Shell was tasked with cutting carbon emissions in a landmark Dutch case. A Dutch court has ordered Royal Dutch Shell to deepen its plan to cut greenhouse gas emissions in a landmark ruling.

Shell, which is appealing the decision, has been ordered to cut carbon emissions from global warming by 45% by 2030, compared to 2019 levels.

Shell has struggled after developing one of the oil and gas industry’s most ambitious climate strategies. The company aims to reduce the carbon intensity of its products by at least 6 percent by 2023, 20 percent by 2030, 45 percent by 2035 and 100 percent by 2050 compared to 2016 levels.”

The Dutch court concluded that Shell’s climate policy “was not specific and conditional … that’s not enough.”

The lawsuit is also filed after it was revealed that Shell would invest more than $5 billion in the fourth quarter of 2022.

NatWest has announced that it will immediately stop all reserve-based loans to new clients that finance oil and gas exploration and production, and then stop them entirely by the end of 2025.

The lender’s commitment comes as financial firms face increasing pressure from politicians and investors to reduce the climate-damaging carbon emissions associated with their financing.

A NatWest spokesman said the bank will continue to honor the provision-based loan agreements entered into by existing customers until the end of 2025, before they expire.

Climate activists said the move represented progress but raised concerns about the delay.

“The decision to wait three years to implement their policies is at odds with the urgency of the climate crisis,” said Tony Burdon, CEO of climate campaign group Make My Money Matter.