U.K.-based environmental law firm ClientEarth is suing Shell’s 11-member board, saying they are failing to properly manage the business risks associated with climate change. The lawsuit, filed in England’s high court, claims that the company’s current climate strategy is inadequate, which puts Shell at a financial risk as the world works to move away from fossil fuels, The Guardian reported.
ClientEarth is a minor shareholder in Shell and is suing under the UK Companies Act, which imposes a legal duty on a company’s board of directors to ensure the firm is successful, Reuters explained. In a statement announcing the lawsuit, ClientEarth said it believes Shell’s board has not done enough to transition to greener energy. According to Client Earth, this is the first case in the world that seeks to hold a corporation’s board liable for failing to prepare for a net-zero future.
“This will tie the company to projects and investments that are likely to become unprofitable as the world cleans up its energy systems. That puts the company’s long-term commercial viability at risk, and also threatens efforts to protect the planet, further increasing the risk to the company,” the statement reads. “The future consequences of Shell’s flawed climate plans could cause the company’s value to plummet, costing jobs and running the risk of shareholders and investors losing significant amounts of money, including people’s pension funds.”
Shell rejected the allegations that the board has not worked in the company’s best interests. “ClientEarth’s attempt...to overturn the board’s policy as approved by our shareholders has no merit,” a spokesperson told Reuters.
This lawsuit announcement comes a week after Shell announced a record $40 billion profit in 2022—double of what the company made in 2021. Much of this windfall was fueled by Russia’s invasion of Ukraine, which led to an energy crisis.
A May 2022 report from the Guardian found that several large oil companies, including Shell, were set to spend over $100 million a day for the rest of this decade on fossil fuel projects. All this is short-sighted from a planetary perspective—and maybe from a business one, too.