# Institutional investors back Shell board lawsuit over climate risk Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-02-10 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: European Investors Support Novel Climate Lawsuit Against Shell Meta Description: European institutional investors support a London lawsuit against Shell's board for alleged climate mismanagement, in a case with significant implications URL: https://financedigest.com/institutional-investors-back-shell-board-lawsuit-over-climate-riskhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-02-10t101906z6lynxmpej18004rtroptp4shell-results-1736814458867-compressed.jpg) By Kirstin Ridley LONDON (Reuters) – A group of European institutional investors is backing a novel London lawsuit against energy giant Shell’s board over alleged climate mismanagement in a case that could have far-reaching implications for how companies tackle emissions. ClientEarth, an environmental law charity turned activist Shell investor, said it had filed a High Court claim on Wednesday, alleging Shell’s 11 directors have failed to manage the “material and foreseeable” risks posed to the company by climate change – and that they are breaking company law. It is the first, notable lawsuit by a [shareholder against a board](https://www.financedigest.com/ericssons-board-rebuked-by-shareholders-at-agm-for-second-year-in-a-row.html "Ericsson’s board rebuked by shareholders at AGM for second year in a row") over the alleged failure to properly prepare for a shift away from fossil fuels – and comes one week after Shell posted a record $40 billion profit for 2022, partly fuelled by the energy crunch after Russia’s invasion of Ukraine. Shell rejected the allegations, [saying its climate](https://www.financedigest.com/live-up-to-your-climate-promises-uk-pm-will-say.html "“Live up to your climate promises,” UK PM will say") targets were ambitious and on track and that its directors complied with their legal duties and acted in the company’s best interests. “ClientEarth’s attempt … to overturn the [board’s policy as approved by our shareholders](https://www.financedigest.com/hsbc-board-recommends-shareholders-vote-against-spin-off-resolution.html "HSBC board recommends shareholders vote against spin-off resolution") has no merit,” a spokesperson said. CARBON CONFLICT Shell has ramped up spending on [renewable energy](https://www.financedigest.com/ges-investors-seek-solutions-to-renewable-energy-supply-chain-challenges.html "GE’s investors seek solutions to renewable energy, supply chain challenges") and low-carbon technologies. But [British pension funds](https://www.financedigest.com/british-ev-startup-arrival-gets-300-million-funding-aims-to-slow-cash-burn.html "British EV startup Arrival gets 0 million funding, aims to slow cash-burn") London CIV and Nest, Swedish pension fund AP3, French asset manager Sanso IS, Degroof Petercam Asset Management in Belgium and Denmark’s Danske Bank Asset Management and Danica Pension and AP Pension are among those to have written letters supporting the claim. The [investor group has around 450 billion](https://www.financedigest.com/uk-investors-add-1-2-billion-to-equity-funds-in-march-calastone.html "UK investors add .2 billion to equity funds in March – Calastone") pounds ($543 billion) in assets under management collectively, and owns about 12 million of Shell’s 7 billion shares. London CIV said its Shell stake was a “primary hotspot of [risk and exposure](https://www.financedigest.com/preventing-an-operationally-crippling-ransomware-attack-do-you-know-where-your-risk-exposure-lies.html "PREVENTING AN OPERATIONALLY CRIPPLING RANSOMWARE ATTACK – DO YOU KNOW WHERE YOUR RISK EXPOSURE LIES?") within our portfolio. We hope the whole energy industry sits up and takes notice,” added Mark Fawcett, Nest’s [chief investment officer](https://www.financedigest.com/iris-software-group-names-matt-tuson-as-chief-revenue-officer.html "IRIS Software Group names Matt Tuson as Chief Revenue Officer"). If judges allow the so-called derivative action to proceed, it could encourage investors in other companies, including in those funding carbon emitters, to litigate against boards that fail to adequately [manage climate-related risks](https://www.financedigest.com/managing-corporate-currency-risk-the-cfos-balancing-act.html "Managing Corporate Currency Risk: The CFO’s Balancing Act"), experts say. Some [banks are reducing their funding of fossil fuel](https://www.financedigest.com/stocks-rise-after-bank-sale-fuels-investor-risk-appetite.html "Stocks rise after bank sale fuels investor risk appetite") companies. The case comes two years after Shell was ordered to slash carbon emissions in a [landmark](https://www.financedigest.com/australia-drops-landmark-criminal-cartel-case-against-citi-deutsche.html "Australia drops landmark criminal cartel case against Citi, Deutsche") Dutch climate case. Shell, which is appealing, plans to reduce the [carbon intensity of its products – which measures greenhouse gas emissions](https://www.financedigest.com/playground-xyz-study-finds-carbon-emissions-from-digital-ads-fall-by-63-on-average-when-measured-and-optimized-for-attention-time.html "Playground xyz study finds carbon emissions from digital ads fall by 63% on average when measured and optimized for attention time") per unit of energy produced – by 20% by 2030, 45% by 2035 and by 100% by 2050 from 2016 levels. According to third-party assessments, the strategy excludes short to medium-term targets to [cut the absolute emissions](https://www.financedigest.com/citi-pledges-to-cut-emissions-for-more-sectors-including-coal.html "Citi pledges to cut emissions for more sectors including coal") from products Shell sells, known as Scope 3 emissions, although they account for more than 90% of overall emissions, ClientEarth said. 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](https://www.financedigest.com/plastic-antibody-developer-strengthens-board-following-further-investment-from-mercia-fund-management.html "“Plastic antibody” developer strengthens board following further investment from Mercia Fund Management") those risks,” said ClientEarth’s senior lawyer Paul Benson. The UK Companies Act imposes a legal duty on directors to promote the [success of businesses](https://www.financedigest.com/why-mobile-apps-are-crucial-for-a-successful-business.html "Why Mobile Apps are Crucial for a Successful Business"). ClientEarth [declined to divulge which other companies](https://www.financedigest.com/around-40-of-german-companies-expect-output-decline-in-2023-iw-institute.html "Around 40% of German companies expect output decline in 2023 – IW institute") it has invested in. ($1 = 0.8280 pounds) (Reporting by Kirstin Ridley, additional reporting by Simon Jessop and Shadia Nasralla, editing by Sinead Cruise) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---