The claim

In 2023, ClientEarth took Shell’s Board of Directors to court over its mismanagement of climate risk. 

It was a world-first case seeking to hold corporate directors personally liable for their failure to prepare for the energy transition. 

The High Court of England and Wales rejected the lawsuit. But we believe that judgment was flawed and merits deeper scrutiny.

Read our full legal briefing 

We've published our full legal briefing, along with key court filings, to encourage debate on the critical issues raised in this lawsuit. 

About the claim

ClientEarth, in its capacity as shareholder, took derivative action to compel Shell’s Board of Directors to act in the best long-term interests of the company by strengthening its climate plans. We sought to ensure that the Board’s strategy of prioritising near-term profit does not come at the expense of enduring commercial viability for all of the company’s stakeholders, including its shareholders and employees.

What did ClientEarth's lawsuit argue?

The lawsuit argued that the failure of Shell’s Board of Directors to properly prepare the company for the energy transition constituted a breach of its legal duties under the English Companies Act 2006.

Section 172 of that Act requires company directors to act in a way that they consider will best promote the success of the company for the benefit of its members as a whole. Under section 174 of the Act, Shell’s directors are also legally required to exercise reasonable care, skill and diligence in the discharge of their duties.

Given the existential threat climate change and the energy transition present to Shell, fulfilling these duties requires proper management of climate risk. Our central argument was that the Board’s strategy to manage this risk was inadequate and jeopardised the company’s long term viability in a world rapidly shifting away from fossil fuels. 

Who supported the lawsuit?

The claim received the unprecedented support of a group of institutional investors collectively holding more than 12 million shares in the company and more than half a trillion US dollars (£450 billion) in total assets under management. The group included, among others, UK pension funds Nest and London CIV, Swedish national pension fund AP3, French asset manager Sanso IS, Degroof Petercam Asset Management (DPAM) in Belgium, as well as Danske Bank Asset Management and pension funds Danica Pension and AP Pension in Denmark.

ClientEarth also received letters of support from shareholders who stated that their position is aligned with the arguments that ClientEarth made, including from UK local government pension scheme Brunel Pension Partnership. Those shareholders held a further 12.5 million shares in the company.

We received still further letters of support for the claim, or the concerns raised by it, from investors who had divested from Shell as a result of their concerns with the Board’s climate risk management. Those investors had total AUM of approximately USD 40 billion. In those cases, the position of the relevant investors was broadly that, were the Board to adopt and implement a credible Paris-aligned strategy, Shell would become eligible for reinvestment.

Why do we think the High Court's decision was flawed?

In our view, the Court failed to properly engage with ClientEarth’s detailed evidence or our substantive argument that the Board is mismanaging climate risk. 

It therefore raises a number of important questions, in particular whether the Courts are being too deferential on the question of breach of directors’ duties. The decision is certainly not a vindication of Shell’s strategy, but the effect of it is really that Shell has been given a ‘free pass’. 

It’s also a missed opportunity for the Courts to interpret directors’ legal duties in light of the risks that climate change presents to companies and shareholder value. 

One of the advantages of the UK’s common law system is its agility and flexibility in response to the critical issues of our time. Courts cannot and must not avoid the important questions that climate change poses to traditional legal conventions and to the realities for companies, the economy and society at large.

What's next for ClientEarth?

ClientEarth is undeterred by this decision, and we will keep fighting for accountability. It is companies like Shell that are most exposed to climate risk and which have the most to lose from their directors chasing short-term wins over long-term prosperity.  

High-emitting companies that fail to adapt are threatening their own futures as well as driving us closer to climate disaster. It is inevitable that there will be legal consequences. If not now, then soon.

Investors want to see action in line with the risk climate change presents and will challenge those who aren’t doing enough to transition their business. We hope the whole energy industry sits up and take notice.

Mark Fawcett

Nest’s Chief Investment Office

In our view, a Board of Directors of a high-emitting company has a fiduciary duty to manage climate risk, and in so doing, consider the impacts of its decisions on climate change, and to reduce its contribution to it. We consider that ClientEarth’s claim is in our client funds’ interests as a shareholder of Shell, and we support it.

Jacqueline Amy Jackson

London CIV’s Head of Responsible Investment

Lead lawyer Paul Benson on the Court's decision
If ClientEarth’s claim was successful and Shell’s strategy was to become Paris-aligned, the company could become an attractive investment again.
Anders Schelde, AkademikerPension Chief Investment Officer