Shell directors sued for ‘failing to prepare company for net zero’
The directors of Shell are being sued for failing to properly prepare the multinational oil and gas company for net zero.
In what is thought to be a first-of-its-kind action, the lawsuit brought by activist shareholders claims that Shell’s 13 directors are personally liable for failing to devise a strategy in line with the Paris agreement, which aims to limit global heating to below 2C by slashing fossil fuel emissions.
The lawsuit claims the failure puts the directors in breach of their duties under the UK’s Companies Act.
If successful, Shell’s board could be forced by the courts to change its strategy, taking specific concrete steps to align its plan with the Paris deal. But if the claimants lose, they could be liable for the full costs of the case, including directors’ legal fees.
ClientEarth, the environmental law organisation taking the action against Shell, said it was calling for other shareholders to join.
At Shell’s 2021 annual general meeting more than 30% of shareholders voted against the board in support of a resolution calling for Paris-aligned emissions targets.
But other shareholders may be reluctant to join after Shell announced in February an increase in dividends and a plan to buy back shares – increasing the value of those remaining in investors’ hands – after reporting a staggering $19bn profit.
ClientEarth has said it is taking the action against Shell in the company’s best interests. Their claim says the board has failed to properly account for the risks climate change poses to the company. Under the Companies Act, directors are legally bound to act in a way that promotes the company’s success and to exercise reasonable care, skill and diligence.
Paul Benson, a ClientEarth lawyer, said: “It’s the first of
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