A Groundbreaking Lawsuit, Is Detrimental to The Company's Future

Shell’s Lack of Climate Action, According to A Groundbreaking Lawsuit, Is Detrimental to The Company’s Future.

The transition of big energy firms from fossil fuels to renewable sources is undoubtedly in the best interest of sustaining a livable environment, but a ground-breaking lawsuit contends that it is also in the best interest of these businesses.

non-profit environmental law ClientEarth launched a lawsuit against the 11-member Board of Directors of Shell today, claiming that the executives of the oil major are failing to address the true risks that the climate catastrophe poses to their business.

According to ClientEarth senior lawyer Paul Bensons, the writing is on the wall for fossil fuels in the long run, despite the fact that Shell is currently experiencing record profits as a result of the volatility in the global energy market.

A Groundbreaking Lawsuit, Is Detrimental to The Company's Future

Not only is the transition to a low-carbon economy inevitable, but it is also now taking place. Despite having a legal obligation to manage such risks, the Board is continuing with a transition strategy that is fundamentally unsound, gravely exposing the firm to the hazards that climate change poses to Shell’s future prosperity.

The lawsuit was brought before the High Court of England and Wales by ClientEarth. According to Reuters, it is suing Shell in accordance with the UK Companies Act, which requires company directors to take action to guarantee the success of their businesses.

It is the first shareholder case brought against a firm for failing to address the climate catastrophe, and if judges permit it to proceed, it may serve as an example for similar lawsuits brought against other fossil fuel companies.

According to the news announcement, ClientEarth is supported by Shell investors who collectively own more than 12 million shares and more than half a trillion dollars in assets under management.

These investors include the Danish Danske Bank Asset Management, the UK pension funds Danica Pension and AP Pension, the Swedish National Pension Fund AP3, the French asset manager Sanso IS, the Belgian Degroof Petercam Asset Management, and the UK pension funds Nest and London CIV.

A Groundbreaking Lawsuit, Is Detrimental to The Company's Future

According to Nest Chief Investment Officer Mark Fawcett in the press release, investors want to see action in response to the risk that climate change poses and will push those who aren’t doing enough to transition their business. We hope this causes a stir throughout the entire energy sector.

The lawsuit was filed a week after Shell revealed record-breaking profits of $40 billion for 2022, joining other oil and gas firms in revealing a historic haul from a year in which energy costs skyrocketed as a result of Russia’s invasion of Ukraine.

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The business is also accused of not spending enough money on renewable energy. As The Guardian noted at the time, Global Witness petitioned the U.S. Securities and Exchange Commission (SEC) to look into whether Shell had misrepresented its renewable investments in its annual report.

Shell defended the corporate direction chosen by its board in response to the ClientEarth litigation.

A Groundbreaking Lawsuit, Is Detrimental to The Company's Future

We reject ClientEarth’s claims, a Shell spokeswoman reportedly said, according to The Guardian. Our directors have always operated in the company’s best interests while also abiding by their legal obligations.

We think that our climate goals are in line with the Paris Agreement’s more challenging [1.5C] aim. With 80% of shareholders voting in favor of this approach at our most recent [annual general meeting], our shareholders firmly support the advancements we are making with regard to our energy transition strategy.

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According to ClientEarth, Shell has a stated objective of cutting emissions from their global operations in half by 2030. But according to unbiased analyses, Shell’s plans fail to take into account scope 3 emissions, which are generated in the short to medium term by using Shell goods like gasoline and contribute to more than 90% of the company’s overall emissions.

Overall, according to their plans, net emissions would only be reduced by 5% by 2030. Despite the International Energy Agency’s advice that no new oil and gas developments should be launched after 2021 if businesses and world leaders want to meet the Paris Agreement’s goal of keeping global warming to 1.5 degrees Celsius above pre-industrial levels, Shell has plans to invest in new oil and gas developments.

The Board’s transition plan keeps using fossil fuels for many years to come, not just the next few. Its reduction goals hardly even come close to covering its overall emissions. Furthermore, Benson stated in the press release, “doubling down on new oil and gas projects is not a credible plan; it is a prescription for stranded assets.”

A Groundbreaking Lawsuit, Is Detrimental to The Company's Future

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Shell has already faced legal action because of the speed at which its climate policies are being implemented.

In 2021, a Dutch court ordered Shell to abide by the Paris Agreement and cut its emissions by 45 percent by 2030, giving Friends of the Earth Netherlands an unprecedented legal victory over the business. That judgment is currently being appealed by Shell.

Vishal Rana

Vishal is working as a Content Editor at Enviro360. He covers a wide range of topics, including media, energy, weather, industry news, daily news, climate, etc. Apart from this, Vishal is a sports enthusiast and loves to play cricket. Also, he is an avid moviegoer and spends his free time watching Web series and Hollywood Movies.

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