Shell’s board members could have been offered too much “discretion” over climate policy in a High Court judgement, according to an NGO whose efforts to pursue the oil company’s board for failing in their duties on emissions were rejected last year.

The statement comes from ClientEarth, the not-for-profit climate campaigners, after they released a legal analysis of the judgment from July last year they received denying them permission to push ahead with a “derivative” claim against Shell’s directors. It was thought to be the first case of its kind in which it was argued directors fell short in their section 172 duties in relation to climate transition plans.

Shell has responded to the analysis by insisting ClientEarth’s case was a “misuse of the court’s time”.

The not-for-profit’s analysis in large part counters the reasoning of the High Court ruling. The Court of Appeal later refused ClientEarth permission to appeal.

Paul Benson, senior lawyer at ClientEarth, says the case was an attempt to reassess directors’ duties in an era of climate risk.

“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 more pressing.”

ClientEarth’s analysis challenges the court ruling across nine separate elements.

In essence, the NGO claimed the Shell directors were “mismanaging the material and foreseeable risks that climate change present to the company”, and were therefore in breach of section 172 of the Companies Act and also section 174, which says directors must exercise “reasonable care, skill and diligence”.

A narrower scope

Perhaps one of the biggest aspects of the High Court ruling was that the ClientEarth claim was not brought in “good faith” because the group owned only 27 shares in Shell so the claim was based on the narrow policy objectives of an NGO.

ClientEarth says this argument misses the point: its interests and those of supportive shareholders—among them big pension funds in the UK and abroad—were “all aligned”.
Another key argument of the court was that ClientEarth had not gathered expert evidence.

ClientEarth counters that the evidence submitted was the “available” scientific research, and says if higher evidence were required, the court could have directed that it be obtained.

Meanwhile, a Shell spokesman dismissed this week’s ClientEarth analysis . “From the start, this claim was a misuse of the court’s time and resources, and not an effective way to tackle climate change.

“The world needs wide-raning solutions—not judgements against one company—to make an impact on climate change and transform the world’s energy system.

“By working together, with effective government policies, we can help shift consumer demand to low-carbon products and develop the infrastructure and technology needed, while maintaining a secure and affordable supply of energy.”

The ClientEarth analysis makes for an interesting read at a time when many experts expect more climate litigation to hit companies. There is clearly disappointment in many quarters that the Shell case did not go ahead to become a true test of directors’ duties and section 172.

For the time being, that legal route remains on pause. In the meantime, NGOs are still able to push companies on their climate performance, and investors and fund managers remain able to pressure boards. Growing levels of mandatory disclosure will likely provide a window on the way companies are changing their policies.