Corporate strategy on climate risk in the courtroom: Not worth powder in shot

Abstract

In ClientEarth v Shell Plc, ClientEarth brought ‘ground-breaking’ derivative litigation against the board of directors of Royal Dutch Shell Plc by alleging their corporate strategy on climate risk was determined in breaches of duties under the Companies Act 2006, ss. 172 and 174. This analysis of ClientEarth demonstrates the importance of the decision for climate litigation. First, it confirms that corporate strategy on climate risk is a matter for the directors and is not actionable because there is no accepted methodology on managing climate risk that can evidence the strategy is unreasonable. Second, it confirms that even if corporate strategy on climate risk is determined in breach of duty, it is still not worth powder in shot to pursue derivatively. The decision means climate risk is left to the private ordering of the company. That should send a message to Parliament because the directors’ determination of what is best for the company is not frictionless with environmental law goals. Without effective public ordering, the friction risks the UK failing to meet its international climate obligations.