Shareholder Lawsuit Filed Against Shell Board of Directors in the UK Concerning Failure to Prepare for Climate Change

ClientEarth, an environmental law organization, has filed a shareholder derivative lawsuit in the United Kingdom against Shell's board of directors for an alleged failure to adequately prepare Shell for the impact of climate change.  Specifically, according to ClientEarth, the lawsuit "challenge[s] [Shell] on its failure to properly prepare for the net zero transition" and seeks to compel Shell to "put[] in place sufficient targets to reduce its emissions over the next 3, 5 and 10 years in order meet net zero [so as to] secure the company's long-term value, while protecting investors' capital and the climate." (https://www.clientearth.org/latest/latest-updates/news/we-re-taking-legal-action-against-shell-s-board-for-mismanaging-climate-risk/)

Irrespective of whether this lawsuit is ultimately successful, it reflects a new tactic adopted by environmental organizations to use the law to place additional pressure on fossil fuel companies.  (And this tactic may soon be emulated in the United States and other key jurisdictions.)  Even though many companies are focused on potential regulatory action (and for good reason), it must be emphasized that litigation--whether by shareholders, local governments, or other interested parties--remains a tactic embraced by many environmental organizations and often pursued vigorously.  (For example, there are over two dozen lawsuits pending in the U.S. courts against fossil fuel companies claiming that their activities constitute a "public nuisance.")  When assessing legal risk, these sort of litigations must be considered. 

Still, to date, the overwhelming majority of these litigations have been unsuccessful.  However, if one of these cases "breaks through," that could dramatically transform the legal landscape, and not only for fossil fuel companies, but also for those corporations that regularly interact with fossil fuel companies or could be perceived to facilitate their operations (e.g., financial institutions).