British Court Spares Shell In Climate Case

A British court dismissed a lawsuit that accused Shell's leadership of mismanaging climate risks to the oil giant on Monday, but the activist investor group that brought it plans to appeal.

Corporations have faced a growing number of climate-related lawsuits in recent years as they come under pressure to step up efforts to curb global warming.

Shell was already ordered by a Dutch court in 2021 to slash its greenhouse gas emissions by 45 percent by the end of the decade after it was sued by environmental groups.

This time, ClientEarth, an environmental law NGO and a minor Shell shareholder, filed in February a lawsuit in the High Court of England and Wales against Shell bosses "for failing to manage the material and foreseeable risks posed to the company by climate change".

But the judges dismissed the case, once in May and now following a hearing earlier in July.

ClientEarth said it was disappointed by the dismissal and plans to appeal.

A Shell spokesperson said the dismissal was "the right outcome -- the court has reaffirmed its decision that this claim is fundamentally flawed".

The company said ClientEarth's "claim entirely ignores how directors of a business as large and complex as Shell must balance a range of competing considerations".

At its annual shareholders meeting in May, Shell's management received majority backing even though there were disruptions and doubts expressed about its climate transition.

Shell later announced a change of plans: instead of gradually reducing oil output it would hold it steady until 2030.

"The Board's strategy to manage the risks of the energy transition was fundamentally flawed as it was," said ClientEarth senior lawyer Paul Benson.

"Now the Board seems to be dropping even any pretence that it will take meaningful action," he added in a statement.

ClientEarth says Shell's flawed climate strategy is inconsistent with the Paris Agreement and jeopardises the company's future commercial success, and thus constitutes a breach of its legal duties under English company law.

"The Board's refusal to take decisive action to prepare the company for the fast-advancing energy transition puts Shell's future commercial viability at risk," said Benson.

According to ClientEarth, this is the first time a company's board has been targeted by a lawsuit for failing to properly handle the climate transition.

Shell's first-quarter net profit surged 22 percent to $8.7 billion but has indicated its second quarter performance has been hit by a drop in gas sales.