We’ve previously written about ClientEarth’s lawsuit against Shell’s Board of Directors alleging climate risk mismanagement. The lawsuit was originally filed in March 2022, and was dismissed by the UK high court in May 2023. However, a recent press release from ClientEarth indicates that the group is not giving up and will be seeking to appeal the dismissal of their claim.
While the court recognized the importance of climate change to Shell’s business model, the case was originally dismissed because the court found that ClientEarth’s “real interest is not in how to best promote the success of Shell for the benefit of its members as a whole.” Additionally, the court decided that Shell had a plan to reach net zero and even if that plan was fundamentally flawed, it is ultimately the director’s right to adopt such a plan. ClientEarth still believes that Shell’s plan violates its duty to its shareholders and is hopeful that a higher court will reverse the decision stating:
ClientEarth alleges that Shell’s Board’s flawed climate strategy is inconsistent with the Paris Agreement and jeopardises the company’s future commercial success, in breach of its legal duties under English company law. Institutional investors with over 12 million shares in the company came out in support of the claim, including Nest, the UK’s largest workplace pension fund.
Cases like ClientEarth’s are becoming more common. Shareholders are bringing more actions against companies for their failure to manage climate as a material risk. If an appeal is granted, the Shell case will likely continue to build out this theory and serve as a blueprint for future cases.