Activist Shareholder Sues Shell Board Over Climate Strategy

(Photo Credit: Mike Mozart/Flickr)

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

Shell’s board of directors got hit with a lawsuit by activist shareholder ClientEarth on Thursday. 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 company’s long-term survival.

Oil Be Back

Oil firms have had a terrific 2022, with Shell reporting its best annual profits in 115 years last week. Fellow British oil goliath BP also registered record profits this week, and simultaneously backtracked on many of its climate promises, saying current circumstances (we’re looking at you Putin) mean it’ll need to cling to fossil fuels a little longer than planned.

The record profits driven 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, notifying Shell’s board of its intentions last March, shortly after Putin’s invasion began. But it’s not the first activist shareholder to ruffle an oil giant’s feathers:

  • In 2021 Engine No. 1, a small hedge fund, managed to snag three seats on Exxon’s board by convincing other, much bigger investors that looking to the long-term benefits of clean energy was essential for the business’s future.
  • Climate change litigation globally is gathering (non-coal-generated) steam. The number of climate change lawsuits doubled between 2015 and 2022 with 25% of those cases filed since 2020, according to data from the Grantham Research Institute and the Sabin Center for Climate Change Law.

“There haven’t been that many cases in this vein in the past, and the best-known one (People and Planet v. HM Treasury) clearly affirmed that companies (and their directors) have a wide discretion in how they fulfill their obligations. So ClientEarth does face challenging odds,” Prof. Veerle Heyvaert, an expert in climate law at the London School of Economics, told The Daily Upside. “On the other hand, that case is from 2009, and a lot has changed in the meantime. Courts around the world certainly take climate-related claims a lot more seriously now than 10 years ago.”

Plastic Punks: ClientEarth already has some savoir faire regarding climate litigation. Last month it was one of three groups that filed a lawsuit against French consumer giant Danone, famous for its dinky yogurt pots and bottled water empire, accusing it of being lackadaisical about its contributions to plastic pollution. ClientEarth took advantage of a relatively new French “duty of vigilance” law which forces companies to monitor and publish details about environmental and human issues in their operations. Quelle vigilance!