Demonstrators participate in a Fridays for Future protest calling for money for climate action at the COP27 U.N. Climate Summit, Friday, Nov. 11, 2022, in Sharm el-Sheikh, Egypt.
HUGE profits declared by oil and gas firms should be channelled towards compensating for the loss and damages suffered by victims of climate change, campaign group Greenpeace has urged.
Following Shell’s announcement last week of its record high profits of £32.2 billion last year, BP is expected to announce record profits of its own tomorrow.
The firm has already announced more than £20bn profit for the first three quarters of last year.
Collectively, energy giants Shell, BP, Chevron, Exxon, and Total are believed to have pocketed almost £166bn in profits last year, said Greenpeace.
“The shift to a low-carbon economy is not just inevitable, it’s already happening. Yet the board is persisting with a transition strategy that is fundamentally flawed.”
A group of activist investors sued Shell’s board of directors on Wednesday for failing to “deliver the reduction in emissions that is needed to keep global climate goals within reach.”
ClientEarth, an environmental law charity and institutional investor in Shell, described the case as the first time a company board is facing a shareholder lawsuit for inadequately preparing to transition away from fossil fuels.
“Shell may be making record profits now due to the turmoil of the global energy market, but the writing is on the wall for fossil fuels long term,” Paul Benson, a senior lawyer at ClientEarth, said in a statement. “The shift to a low-carbon economy is not just inevitable, it’s already happening. Yet the board is persisting with a transition strategy that is fundamentally flawed, leaving the company seriously exposed to the risks that climate change poses to Shell’s future success—despite the board’s legal duty to manage those risks.”
The lawsuit, which is backed by large institutional investors that collectively hold 12 million shares of Shell, alleges that the oil giant’s 11 directors are violating the Companies Act, a U.K. law that requires corporate boards to “promote the success” of the business.
By failing to sufficiently manage climate risks and implement “an energy transition strategy that aligns with the Paris Agreement,” Shell is flouting its legal obligations, the lawsuit contends.
“Shell’s Board on the other hand maintains that its ‘Energy Transition Strategy’—including its plan to be a net-zero emissions business by 2050—is consistent with the 1.5°C temperature goal of the Paris Agreement,” ClientEarth notes. “It also claims that its plan to halve emissions from its global operations by 2030 is ‘industry-leading,’ however this covers less than 10% of its overall emissions.”
“It is in the best interests of the company, its employees, and its shareholders—as well as the planet—for Shell to reduce its emissions harder and faster than the board is currently planning.”
ClientEarth and its backers are asking the High Court of Justice in London to force Shell’s board to “adopt a strategy to manage climate risk in line with its duties under the Companies Act” and in compliance with a 2021 Dutch court ruling ordering the oil giant to cut its total carbon emissions by 45% by 2030.
“Long term, it is in the best interests of the company, its employees, and its shareholders—as well as the planet—for Shell to reduce its emissions harder and faster than the board is currently planning,” Benson said.
Jacqueline Amy Jackson, the head of responsible investment at London CIV—one of the institutional backers of ClientEarth’s lawsuit—said that “we do not believe the board has adopted a reasonable or effective strategy to manage the risks associated with climate change affecting Shell.”
“In our view,” Jackson added, “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.”
Shell said in response that ClientEarth’s suit “has no merit.”
ClientEarth filed its complaint a week after Shell announced that its profits doubled in 2022, surging to a record $40 billion as households across Europe and around the world struggled with high energy costs. The company said it returned $26 billion to shareholders last year through dividends and stock buybacks.
Earlier this month, the advocacy group Global Witness filed a complaint with the U.S. Securities and Exchange Commission accusing Shell of “lumping together some of its gas-related investments with its spending on renewables to inflate its overall investment in renewable sources of energy,” misleading investors and authorities.
“Shell’s so-called renewable and energy solutions category is pure fiction,” said Zorka Milin, a senior adviser at Global Witness. “The company is living in fantasy land if it thinks fossil gas has any place in the much-needed energy transition. Shell’s business model has always been, and continues to be, overwhelmingly based on climate-polluting fossil fuels.”
Shell is also facing lawsuits from nearly 14,000 Nigerians whose communities have been devastated by the company’s pollution and oil spills.
BP has scaled back its climate ambitions as it announced that annual profits more than doubled to $28bn (£23bn) in 2022 after a sharp increase in gas prices linked to the Ukraine war boosted its earnings.
In a move that will anger campaigners, the oil and gas giant cut its emissions pledge and plans a greater production of oil and gas over the next seven years compared with previous targets.
The huge annual profit led to renewed calls for a toughened windfall tax, as oil companies reap rewards from higher gas prices while many households and businesses struggle to cope with a sharp rise in energy bills.
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Kate Blagojevic, Greenpeace UK’s head of climate justice, said: “BP is yet another fossil fuel giant mining gold out of the vast suffering caused by the climate and energy crisis.
“What’s worse, their green plans seem to have been strongly undermined by pressure from investors and governments to make even more dirty money out of oil and gas. This is precisely why we need governments to intervene to change the rules.”
Shell initially said it did not expect to pay any windfall tax for 2022, as its North Sea investments meant was not considered to have made any UK profits.
But on 2 February it announced that it would pay $134m (£108m) for 2022, and expected to pay more than $500m (£400m) for 2023.
BP said it would pay $700m (£583m) in windfall tax for 2022.
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BP and Shell both received more money back from the UK government than they paid every year from 2015 to 2020 (except 2017, when Shell paid more than it received).
Shell also paid a negative amount of tax in 2021, taking its 2015 to 2021 total to -£685m of tax in the UK.
