Shell Directors Sued for 'Flawed' Climate Action Plan

---

Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The board of directors of oil major Shell plc (NYSE:SHEL) (London, England) is being sued for its "flawed" climate strategy, which the claimants allege will put the company at financial risk as the world transitions to cleaner energy.

The action taken by environmental lawyers ClientEarth, which has a token shareholding in the company, is a first of its kind and has the heavyweight backing of a number of Shell's own institutional investors. These include leading European pension funds and other investors, including Nest, the U.K.'s largest workplace pension scheme, London CIV which manages the assets for London local government pensions, leading Nordics pension company Danske Bank Asset Management and Swedish national pension fund AP3, among others. Together they hold more than 12 million shares in Shell and control asset investments in excess of £450 million (US$548 million).

ClientEarth senior lawyer Paul Benson said: "Shell may be making record profits now due to the turmoil of the global energy market, but the writing is on the wall for fossil fuels long term. The shift to a low-carbon economy is not just inevitable, it's already happening. Yet the Board 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. Long term, it is in the best interests of the company, its employees and its shareholders -- as well as the planet--for Shell to reduce its emissions harder and faster than the Board is currently planning." ClientEarth have claimed that the Board's transition strategy "clings to fossil fuels not just in the next few years, but for decades to come."

Benson added: "Its reduction targets barely touch the sides of its total emissions. And doubling down on new oil and gas projects isn't a credible plan--it's a recipe for stranded assets. We say this approach fails to manage the risks posed to the company and is a breach of the Board's duties under English law."

Mark Fawcett, Nest's chief investment officer, stated: "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 takes notice. 2023 is a crucial year if we are to keep net zero by 2050 on track and this case can be a springboard for Shell introducing key changes. Robust short- to medium-term strategies are needed to meet the goals of the Paris Agreement, whereas the company's new oil and gas projects in development pose risks to investors in terms of carbon lock-in and stranded assets."

This is the latest climate-based legal challenge against Shell, which in 2021 was ordered by a court in The Hague, Netherlands, to cut its global carbon emissions by 45% by the end of 2030 compared with 2019 levels. The landmark judgment, in a case brought by Friends of the Earth and more than 17,000 co-plaintiffs, demanded that the oil giant's plans should be brought into line with the Paris Climate agreement. Shell's ambitious "Energy Transition Strategy" set out how it will become a net-zero emissions energy business by 2050. The goals announced were to reduce its net carbon intensity by 6-8% by 2023, 20% by 2030, 45% by 2035 and 100% by 2050. The court's ruling demanded that the 2030 target be more than doubled to 45%. For additional information, see June 7, 2021, article - Oil and Gas Majors Hit Hard by Green Revolts.

ClientEarth maintained that the group's net emissions are calculated to fall by just 5% by 2030, "which is a far cry from the net 45% reduction in group-wide emissions by the end of this decade ordered by a Dutch Court in May 2021." It added that the Board's failure to fully comply with the Dutch Court's judgment is also a breach of its legal duties. Shell has appealed the judgment and issued a statement: "We do not accept ClientEarth's allegations. Our directors have complied with their legal duties and have, at all times, acted in the best interests of the company. We believe our climate targets are aligned with the more ambitious [1.5C] goal of the Paris agreement. Our shareholders strongly support the progress we are making on our energy transition strategy, with 80% voting in favor of this strategy at our last AGM."

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).