Activity in the infrastructure and energy sectors often has significant impacts (both good and bad) on the environment and as we explain below, the risk of litigation in this area is significant.
ClientEarth v Shell plc: are directors doing enough to address ESG issues?
ClientEarth's high-profile attempt to hold the directors of Shell plc to account for their company's approach to climate change in the UK courts has highlighted concerns around whether boards of UK companies are taking sufficient account of the wider environmental impacts of their decision-making and activities. Ewan McGaughey et al v. Superannuation Scheme Limited is another example of a recent attempt to bring a derivative claim against directors in the UK courts, similarly alleging failures in relation to climate change strategy. For further details of both claims, please see this earlier briefing (noting that the ultimate outcome of both was in favour of the directors).
Despite being unsuccessful, and the UK courts generally showing a reluctance to intervene with directors' decision-making, these cases have added fuel to the ongoing debate as to whether or not directors' duties and the notion of corporate purpose should be amended in English law, to take greater account of environmental risks and impacts and wider ESG factors. We share our thoughts on this issue in this recent briefing.
Doesn't the failure of these cases mean that ESG litigation risk is overstated?
The principal aim behind many climate change claims may not be to "win" but to draw attention to activities that cause and contribute to climate change – litigation being just one way of achieving this. As activists continue to drive the agenda and push for novel ways to hold companies to account, it would be advisable for boards of infrastructure businesses to increase the focus on transition risks and other ESG risks and factors and to evidence careful thought-process in their decision-making and business strategy.
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