Global Energy Leaders Under Increased Pressure to Reduce Emissions

In a ruling from the Hague District Court on May 26, 2021, the Court has ordered Royal Dutch Shell (“Shell”) to reduce its CO2 emissions by 45% of its 2019 levels by 2030.

Milieudefensie voor Veranderaars (the “Claimants”) claimed that Shell has an obligation to contribute to the prevention of climate change through its corporate policy, stemming from an unwritten standard of care in the Dutch Civil Code. The standard of care comes from Shell’s endorsement of human rights and of soft law such as the UN Global Compact and the OECD Guidelines for Multinational Enterprises. Uniquely, the Claimants did not seek any compensation, only for Shell to reduce its emissions.

This ruling comes after Shell announced plans earlier in 2021 to reduce carbon intensity by 20% by 2030 and 100% by 2050 relative to its 2016 levels – a plan widely considered to be one of the sector’s most ambitious. The Court did not find this policy to be concrete or certain enough to satisfy Shell’s obligations.

Although some are touting the Court’s decision as a landmark decision with global impacts, the ruling is only binding in the Netherlands. Further, Shell will almost certainly appeal, leaving this decision vulnerable to being overturned.

Exxon Mobil Corp (“Exxon”) and Chevron Corp. (“Chevron”) also faced pressure from investors at their annual general meetings on May 27, 2021.

Two Exxon directors were ousted by shareholder Engine No. 1, a hedge fund that has been critical of Exxon’s uptake of climate measures.

Chevron saw two thirds of its investors supporting a resolution to set targets to further reduce its greenhouse gas emissions.

Although these events indicate that the oil and gas industry is under increased pressure from stakeholders to move toward a more climate-conscious corporate strategy, the success rate of these initiatives is far from 100%.

Exxon shareholders rejected all of the investor-led environmental resolutions at its annual general meeting, and Chevron shareholders rejected two climate-related resolutions.

Nonetheless, stakeholders are putting the oil and gas industry on notice and some players in the sector, such as Suncor Energy Inc. (“Suncor”), are heeding that warning. Suncor has pledged to cut its greenhouse gas emissions by one third by 2030 and to be net zero on carbon emissions by 2050.

The MLT Aikins energy group advises participants in the energy industry in Western Canada on a diverse range of matters, including environmental, social and governance (ESG) strategies and compliance. Contact a member of our energy group today to hear more about how these two important cases might affect you in the future.

Author: Carolyn Wilson

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.