Companies are likely to face increasing litigation over their responses to climate change, warned a Bracewell partner this week, suggesting directors may be at the sharp end of the move.
“I expect more litigation relating to ESG disclosures and claims seeking to make individuals personally liable,” said Alistair Calvert at a media roundtable this week.
He cited ClientEarth’s case targeting the board of Shell. The accusations allege the directors have failed to properly prepare for the energy transition.
“The accusation is of a failing to adopt a climate change strategy that is in line with the Paris Agreement,” Calvert said. “These will be hard cases to win, but one reason they are brought is to generate publicity.”
Companies face such lawsuits as a matter of course. Attempting to hold directors liable directly for actions is a new development.
“Personal claims against directors may be a potential area of growth. Directors will have to take the threat seriously, as they have an impact on their professional and personal lives,” Calvert warned.
Regulators
Another area ripe for litigation is on greenwashing cases. Calvert cited the recent case against Santos and its stated ambitions to reach net zero by 2040.
While such cases tend to be driven by activist groups, regulators are also taking action. The Competition and Markets Authority’s (CMA) Green Claims Code and Advertising Standards Authority (ASA) are “also cracking down on misleading environmental claims in adverts”, Calvert said.
Global Witness has filed a complaint with the US Securities and Exchange Commission (SEC) over Shell’s claims. Shell claims to spend 12% of its annual expenditure on renewables and energy solutions. Global Witness has said the true figure is only 1.5%.
Much of Shell’s spending in this area goes to “investments in climate-wrecking gas”, the NGO said.
As such, it said, the SEC must investigate. The agency should determine whether Shell’s plans have “violated relevant US securities laws”. If need be, the SEC should “impose fines and to prohibit Shell from further violations”.
Climate is a particular risk for Shell investors, Global Witness said. Misstating investments in renewable energy would be to mislead those investors.
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