Activists are finding all kinds of ways to pressure companies to act on climate change. The latest: In the UK, a group of climate lawyers is suing Shell’s directors personally for putting the oil major at risk by refusing to make a better climate change adaptation plan.
The lawsuit, filed in the high court of England and Wales, claims that Shell’s 11 board directors, including Wael Sawan, who became CEO in January 2023, are mismanaging climate risk. In doing so, the lawyers argue, the directors are breaching company law. ClientEarth, the lawyer-run non-profit using its status as a shareholder—with a nominal stake in Shell—to bring the claim, says it’s the first lawsuit of its kind in the world.
Shell’s directors have “breached their legal duties under the Companies Act by failing to adopt and implement an energy transition strategy that aligns with the Paris Agreement” that put in place a 1.5°C global temperature rise target, ClientEarth said in a press release. The claim will need to be approved by the high court before it can proceed to trial.
“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,” Paul Benson, ClientEarth’s senior lawyer, said in a statement. “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.”
The claim is supported by a group of institutional shareholders including Nest, the UK’s biggest workplace pension scheme, which collectively hold 12 million shares in the company.
Shell, like other oil companies, has recorded stellar profits in the wake of the 2022 Russian invasion of Ukraine, which pushed up oil prices. Last week it reported annual profits of almost $40 billion, the highest in its 115-year history.
In an emailed statement, Shell pointed out that the claimant shareholders represent less than 0.2% of Shell’s shareholder base. “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,” a Shell spokesperson said in the statement.
“We believe our climate targets are aligned with the more ambitious goal of the Paris Agreement: to limit the increase in the global average temperature to 1.5°C above pre-industrial levels. Our shareholders strongly support the progress we are making on our energy transition strategy, with 80% voting in favour of this strategy at our last AGM,” Shell said.
Suing board directors personally may be a new line of attack from activists who argue that oil majors and other companies are causing massive and irreparable harm to the earth’s climate. But it’s also just the latest in an ongoing battle that has becoming increasingly sophisticated and complex over the last few years.
Where protestors most famously used to occupy infrastructure—and are still doing so—there are now also legal challenges like this latest one, or like the 2021 Dutch case brought by Friends of the Earth and 17,000 co-plaintiffs. That case resulted in Shell being ordered to reduce its global carbon emissions by 45% by the end of 2030, as compared to 2019. Shell is appealing that decision. Not long after that verdict, the company relocated its headquarters to London—where, ironically, the law gives more power to minority shareholders than most other countries.
A concerted effort by activist shareholders to make Exxon change its aggressive stance on putting profitability over environmental protection saw a string of proxy votes, and then, in May 2021, the election to Exxon’s board of two activist board members.
Thousands of Nigerians, meanwhile, are also using the courts in the UK to pursue the company for devastating oil pollution related to its activities in the Niger Delta. Shell is fighting the claims.