A claim filed in the English High Court by a non-profit organization against directors of an oil and gas company was one of the first attempts to bring a derivative action against directors for alleged mismanagement of climate risk. In bringing its action, the plaintiff asserted that the directors breached their statutory duties by:

• failing to adopt a measurable and realistic pathway to meeting the absolute net zero (NZ) emissions reduction target by 2050 set out in the company’s energy transition strategy
• failing to properly manage climate risk—including commercial, regulatory and stranded-asset risk
• failing to comply with an earlier Dutch court ruling requiring the company to reduce its worldwide aggregate CO2 emissions by at least net 45% at the end of 2030, relative to 2019 levels

The court criticized the plaintiff for seeking to impose absolute duties on directors which cut across their general duty to have regard to the myriad of complex and competing considerations directors face. In particular, the English High Court reiterated that management decisions made by the board of a company, in large part, could not be appealed to courts of law. For example, while the court noted there may be disagreement between the plaintiff and the company as to how best to achieve NZ 2050 targets, “the law respects the autonomy of the decision making of the Directors on commercial issues and their judgments as to how best to achieve results which are in the best interests of their members as a whole.”

Read more in “Two Courts Defer to Boards’ ESG Decisions and Side with Defendants”.

ClientEarth v Shell plc & Ors [2023] EWHC 1137 (Ch)