Are the English Courts too soft on directors when it comes to ESG?
ClientEarth thinks so.
It’s senior lawyer, Paul Benson, believes that the High Court’s decision to dismiss ClientEarth’s derivative action against Shell’s board of directors raises important questions about whether directors are being afforded too much discretion in relation to their climate-related legal duties. [1]
In ClientEarth’s view, the Court’s decision not to allow the action, which ClientEarth was seeking to bring as a shareholder of Shell against Shell’s directors in their personal capacity, is a missed opportunity on behalf of the judiciary to interpret the law in a way that takes the severity and urgency of climate risk into account.
Here’s ClientEarth’s take on the proceedings - legal-briefing-clientearth-v-board-of-directors-of-shell.pdf
Despite the decision, directors mustn’t dismiss their exposure to climate-related claims. Now more than ever they should be considering the robustness of their climate strategies, as well as the extent and efficacy of their D&O insurance cover, before such risks materialise. The prospect of this sort of derivative action might have cooled off for now, but there is no doubt that the climate is changing.
[1] Full quote from Paul Benson: “We knew that our lawsuit against Shell’s Board was a bold move. It represented a step towards re-evaluating the parameters within which corporate directors function as the world grapples with the climate crisis.
“The judgment therefore raises important questions about whether the English Courts are affording corporate directors too much discretion when it comes to their legal duties. Given the unprecedented scale of climate risk facing high-emitting companies, the issue becomes ever more pressing.”
Rachel Auld
Indemnity Legal
25.01.2024