This last week brought news of record profits for oil and gas companies. The current crisis has led to a situation where companies also feel able to slow down progress on their self declared commitments to reaching Net Zero by 2050. BP has cut its 2030 emissions reduction target from 35-40% to 20%-30% of 2019 levels, as a consequence oil and gas production is now planned to fall by 25% rather than the previously planned 40% by the end of the decade!
In a world where the warnings of bodies like the IPCC and IEA have been downplayed there is evidently still a strong demand for, and a healthy profit to be had, from oil and gas production; in part because we have failed to price pollution in the most effective way to send the strongest market signal to promote decarbonisation.
Given the current economic ‘climate’ slowing progress towards their self declared aims of Net Zero by 2050 may currently seem a pragmatic and sensible action by company boards, but is it? Many commentators point out that slowing down the move to Net Zero now will lead to ‘stranded assets’ in the long term, which won’t do shareholders any favours!
The legal action group Client Earth is bringing a derivative action law suit against Shell arguing that they are failing to protect the company against such future failure, in short, mismanaging climate risk – current plans would only lead to a 5% drop in emissions by 2030. Paul Benson, Client Earth’s senior lawyer states that: ..
We’re taking Shell’s Board of Directors to court for failing to move away from fossil fuels fast enough.
We believe that Shell’s Board is in breach of its legal duties under the UK Companies Act to manage risks to the company that could harm its future success. And the climate crisis presents the biggest risk of them all.
This will be the first time ever that a company’s Board has been challenged on its failure to properly prepare for the energy transition.
CCL UK applauds this action by Client Earth and wishes it every success, please do support Client Earth if you feel able.