Seismic shock for Royal Dutch Shell PLC as it loses landmark case on environmental strategy
It’s the first time a court has ordered an oil company to comply with the Paris Climate Agreement
The Dutch Court of The Hague ordered the FTSE 100 group to reduce CO2 emissions by 45% by the end of 2030 compared to 2019 levels.
READ: Big day for Big Oil as Shell to receive Court verdict on climate strategy, ExxonMobil and Chevron hold AGMs
The 45% reduction also includes ‘scope 3’ emissions, meaning those from burning Shell’s gas and oil.
Before being taken to court by the activists, the company had previously pledged to cut the emissions of the products it sells by 20% over the same time period, as well as setting a net-zero goal by 2050.
A Shell spokesperson told Proactive the firm expects to appeal Wednesday’s “disappointing court decision”.
Historic win & tears of joy. As Court orders Shell to reduce its CO2 emissions, the judge leaves no room for doubt: Shell is contributing to dangerous #ClimateChange & must stop its destructive behaviour now. #StopShell Congratulations @milieudefensie. pic.twitter.com/LV2Q6uSyqx
— Friends of the Earth (@FoEint) May 26, 2021
The case was filed in 2019 on behalf of more than 17,000 Dutch citizens on the basis that the oiler is threatening human rights by investing in fossil fuels.
Action Aid Netherlands, Both ENDS, Fossil Free Netherlands, Young Friends of The Earth Netherlands and the Wadden Sea Association were also co-plaintiffs.
“The CO2 emissions of the Shell group, its suppliers and customers are greater than those of many countries. This contributes to global warming, which leads to dangerous climate change and poses serious risks to human rights, such as the right to life and an undisturbed family life,” the Court said.
“This is a turning point in history. This case is unique because it is the first time a judge has ordered a large polluting company to comply with the Paris Climate Agreement. This ruling may also have major consequences for other big polluters,” said Roger Cox, lawyer for Friends of the Earth Netherlands.
Shell shares shed 0.5% to 1,307.73p before the close.
The judgment comes days after a recent vote by Shell investors on setting more ambitious carbon reduction targets and on the same day that Chevron and Exxon face their own climate campaign battles at their AGMs.
The Shell ruling “undoubtedly sets an important precedent that ties corporate actions to global and national policy in a way that has not been seen before,” said market analyst Neil Wilson at Markets.com.
“It’s acknowledgment that you cannot abstract the likes of Shell and other ‘polluters’ if you like from the legally-binding treaties and obligations nation states have signed up to. Similar judgments may start to emerge that compel polluters to better align their strategy with government policy (eg the Paris treaty). It could also have implications for other sectors (eg Utilities) though that is less clear right now.”
On the investment case for Shell, Wilson said it was “not yet clear” to what extent it changes whether investors will want to own the stock right now.
“True it could face fines if it doesn’t meet the targets, rather than just shareholder disapprobation. It may also need to increase the near-term capex for ‘greening’. But really this is speeding up a process already in motion.”
Coming after its recent investor vote, where more than a third of voters called for the company to set more ambitious carbon reduction targets, he said implied most investors will be comfortable with the ruling, in of itself.
“Worries about higher capex and lower returns are another matter. The quicker Shell moves on this, the sooner fund managers with ESG-criteria to box tick will take a kinder view to the stock. Shell will have to act on this, and it could speed up divestments and potential deal activity if it is looking to use its current scale to swallow up some green energy assets.”
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