"Shell directors sued for 'failing to prepare company for net zero'", 15 Mar 2022

The directors of Shell are being sued for failing to properly prepare...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 take] 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.

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...

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 its kind, this case. It’s the first time that anyone has sought to hold the board accountable for failing to properly prepare for the net zero transition.”...

It will not be the first time Shell has faced action over emissions. In May 2021, a Dutch court ruled the company must reduce its emissions – including those from the fuel it sells – by 45% by the end of 2030.

But Shell’s directors have appealed against that verdict and published an “energy transition strategy” outlining the company’s aim to reach net zero by 2050...