The global litigation cases
related to exposures associated with environmental, social and governance (ESG)
have more than doubled since 2015 to over 2,000. Almost the quarter of these
cases occurred between 2020 and 2022.
These cases have most centered
on greenwashing, i.e., a business makes misleading claims about the
environmental impact of its products, services or brand. In these cases,
compensation has often been sought from company directors.
In February, shareholders
consisting of institutional investors with over 12 million shares in
the company filed a lawsuit against
the global oil supplier Shell`s board of directors at the high court of England
and Wales.
The
Claimant claims that members of Shell’s board are mismanaging climate risk,
breaching company law by failing to implement an energy transition strategy
that aligns with the landmark 2015 Paris Agreement. It is suggested according
to third-party assessments, that, despite this accounting for over 90% of the
firm’s overall emissions, Shell’s strategy excludes short to medium-term
targets to cut the emissions from the products it sells.
The
aim of the Paris Agreement is to pursue efforts to limit global heating to 1.5
degrees Celsius above pre-industrial levels by slashing greenhouse gas
emissions. As the small changes at these thresholds can lead to dramatic shifts
in the Earth’s entire support system, this target to keep the heating at
certain levels is widely regarded as critically important.
The Defendant denied allegations, claiming their directors have complied
with their legal duties and have, at all times, acted in the best interests of
the company, and arguing that its climate targets are Paris-aligned.
In May, the claim against Shell’s directors for
mismanaging climate risk dismissed by High Court.
This
case was considered a first-of-its-kind lawsuit that could have widespread
implications for how other companies plan to cut emissions.
However, legal experts argue that it would be possible to see similar offences created for
individual directors, given that the UK’s
current environmental laws allow regulators to prosecute directors where
offences by a company are committed with their consent, connivance or neglect.
Sources:
https://www.lexology.com/library/detail.aspx?g=36cb65b6-6c76-4235-9b60-5850ddb6d704
