"As Big Oil Digs for More Despite Climate Risks, Investor Lawsuits May Grow", 12 Sep 2019

With the oil industry continuing to invest heavily in projects all but assured to lose money as the world moves toward a lower-carbon economy, as a study published last week shows, investors may increasingly turn to shareholder lawsuits to protect their investments.

That study, by the financial think tank Carbon Tracker, said oil and gas companies invested $50 billion last year in projects that are incompatible with the goal of the Paris Agreement to limit global warming to well below 2 degrees Celsius (°C). Those investments could result in weak returns and investor losses as the world transitions to cleaner energy. The 18 projects highlighted in the report are expected to be “deep out of the money in a low-carbon world,” the authors said

“In making investment decisions, company directors are legally obliged to have regard to material climate-related financial risks, including stranded asset risk,” said Peter Barnett, an attorney with the nonprofit environmental law organization ClientEarth. “We expect to see much greater shareholder scrutiny, and indeed litigation, over large-scale investment in fossil fuel assets that will not be profitable in a low-carbon world.” 

Those shareholder lawsuits have already begun. Two similar suits against ExxonMobil were recently consolidated into one case by a federal judge in Texas, both accusing the oil giant of lying to the public about the risks of climate change to its business. Another suit was filed against Exxon last month in federal court in New Jersey by a mutual fund that said the company’s executives “knew, were reckless, or were grossly negligent in not knowing” that Exxon was misleading its investors.

Those suits and others previously filed have cited information unearthed by the New York attorney general’s office, which in a three-year investigation of the company found it used two sets of data to account for climate risks, one it shared with the public and one it used for internal calculations. That finding prompted the New York AG to file a securities fraud lawsuit against Exxon that will go to trial in October...