Environmental law charity ClientEarth has filed a lawsuit against the individual directors of oil giant Shell in a world-first lawsuit.
The charity alleges that the 11 directors have breached their legal duties, under the UK’s Companies Act, by failing to adopt an energy transition strategy that aligns with the Paris Agreement.
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The claim, filed in the high court of England and Wales on Wednesday, received support from institutional investors holding more than 12 million of Shell’s 7 billion total shares. These equate to more than half a trillion US dollars in total assets under management and include pension funds in the UK, France, Belgium, Denmark, and Sweden.
Mark Fawcett, chief investment officer of UK pension fund Nest said “Investors want to see action in line with the risk climate change presents and will challenge those who aren’t doing enough to transition their business. We hope the whole energy industry sits up and take notice.”
ClientEarth said that this is the first lawsuit, filed by shareholders, that alleges that a company is failing to adequately move away from fossil fuels. The charity has a small shareholding in Shell, allowing it to file a lawsuit against them under the Companies Act.
ClientEarth senior lawyer Paul Benson said of the lawsuit: “the board [of Shell] 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.”
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By GlobalDataIn a response to Offshore Technology, Shell rejected ClientEarth’s allegations, stating that the company “believes our climate targets are aligned with the […] Paris Agreement”. The statement continued to say that Shell “will oppose [ClientEarth’s] application to obtain the court’s permission to pursue this claim” and that “the group of institutional investors collectively holding more than 12 million shares […] represent less than 0.2% of Shell’s total shareholder base.”
The lawsuit comes a week after Shell’s record annual profits sparked criticism in the UK.
On 1 February Shell was accused of mislabelling its investments by non-profit Global Witness. The complaint, filed with the US Securities and Exchange Commission claimed that in 2021 Shell only spent 1.5% ($288m) of its capital expenditure on solar and wind power generation, instead of the 12% it advertised. Global Witness also alleged that most of Shell’s “Renewable and Energy Solutions” spend went to gas-related activities.
Shell denied mislabeling its investments and remains confident that its financial disclosures are compliant with US regulations.
