Environmental law charity ClientEarth’s attempt to sue Shell over its climate strategy has been dismissed by London’s High Court. The case highlighted the challenges of bringing activist shareholder claims, according to lawyers. ClientEarth, which holds 27 shares in Shell, argued that the company’s current climate transition strategy is insufficient to achieve its aim of net zero carbon emissions by 2050, thereby breaching its duties to shareholders. The group sought to bring a derivative case on behalf of Shell against its directors, potentially opening the door for similar lawsuits against other firms. However, Judge William Trower denied permission for the case, stating that directors must consider a range of competing considerations and that courts should not interfere. Shell welcomed the ruling, while ClientEarth expressed disappointment and intends to appeal.
The decision does not spell the end for shareholder activism in the environmental, social, and governance (ESG) sphere, according to legal experts. While the ruling reflects the challenges involved in derivative actions, it is expected that further cases will be pursued based on directors’ duties and responsibilities, both in the UK and internationally. The judge’s acceptance of Shell’s argument that ClientEarth brought the case to advance its own policy agenda could have significant implications for future shareholder claims alleging breach of directors’ duties. However, the ruling may also provide valuable guidance for activists considering future claims related to directors’ duties and boards’ approaches to climate change.