February 28, 2024

A nun, an environmental lawyer, pension fund executives, and the world’s largest wealth manager. These were among the unusual gathering of rebels who won a series of surprising victories against some of the largest and most influential fossil fuel companies in the world this week.

From Houston to The Hague, they fought in shareholder meetings and courtrooms, opening surprising fronts to force global coal, oil and gas companies to address their central role in the climate crisis. And even when they came with strikingly different points of view – corporate shareholders, advocates of children’s rights, environmentalists, thousands of Dutch citizens – they conveyed a common message: the time to get out of the fossil fuel business is no longer in the future. but now.

“These companies are under pressure from regulators, investors and now the courts to improve their game,” said Will Nichols, director of environmental research at Maplecroft, a risk analysis firm. “That’s a big part of society and it’s not a great sight to fight against all of that.”

The most dramatic turning point came in the Netherlands, where a court ordered Royal Dutch Shell, the world’s largest private oil trader and by far the largest company in the Netherlands itself, to drastically cut greenhouse gas emissions from all of its global operations this decade. It was the first time a court ordered a private company to change its business practice for climatic reasons.

The symbolism was inevitable: the Netherlands, famous for their land reclaimed from the sea, are facing the immediate threat of a warming climate caused by the burning of Shell’s own products – oil and gas.

In another example this week, at the annual general meeting of Exxon Mobil, America’s largest oil company, the earnings message was sharply framed: A tiny new hedge fund sparked an investor rebellion to move away from oil and gas – or risks – avert investors and hurt the bottom line.

Chevron’s shareholders agreed to tell the company that it should not only reduce its own emissions, but, notably, reduce emissions from customers who burn oil and gasoline. In Australia, a judge warned the government that a proposed coal mine expansion, a project questioned by eight teenagers and an 86-year-old nun, would ensure that the health of the country’s children was not harmed.

The timing was significant. This week, the scientists also concluded that over the next five years, the average global temperature will rise above a dangerous threshold, at least temporarily, and exceed 1.5 degrees Celsius or 2.7 degrees Fahrenheit, warmer than in pre-industrial times . Avoiding this threshold is the main goal of the Paris Agreement, the pioneering global climate agreement between the world’s nations to combat climate change.

Of course, none of these actions pose an immediate threat to the fossil fuel industry. The world economy has been fueled by oil and coal for a century and a half, and that is not about to change.

Still, decisions like the one in the Netherlands could herald similar legal attacks against other fossil fuel companies and their investors, experts said. Kate Raworth, an economist at Oxford University, described Shell’s loss in court as “a social turning point for a future without fossil fuels”.

Shell said the ruling by a district court in The Hague was “disappointing” and intends to appeal. It could take years for this process to reach the country’s Supreme Court, delaying action but also attracting public attention.

However, if the lower court ruling remains in effect, analysts say Shell would certainly need to realign its business to reduce the oil in its portfolio and halt the growth of liquefied natural gas, which Shell is an industry leader. This is a concern for those investors who have their money in the oil and gas reserves of companies like Shell, said Patrick Parenteau, a professor at Vermont Law School. “A decision that tells a company, ‘You have to get out of the oil business. ‘This must be of serious concern to cautious individuals within the financial community. “

Dangerous for Shell, the national judiciary in the Netherlands has proven to be one of the leaders in climate disputes in the past. In 2019, the Dutch Supreme Court ordered the government to cut greenhouse gas emissions following a lawsuit brought by environmental group Urgenda. It was the first case in the world where a national government was forced to deal with climate change in order to meet its human rights obligations.

This case also started before a district court in The Hague before climbing the ladder of justice. The lawsuit against Shell marked an escalation in that strategy.

After suing the government and winning, the environmentalists decided to take over one of the most influential companies in the country. The case was brought in 2019 by Milieudefensie, the Dutch branch of Friends of the Earth, as well as Greenpeace and 17,000 residents of the Netherlands. The complainants argued that the company was legally obliged to protect Dutch citizens from impending climate risks. The district court agreed.

“The consequences of this case for the fossil fuel industry will be systematic and immediate,” Tessa Khan, the lawyer suing the government on Urgenda’s behalf, said on Twitter. She predicted this would spur other cases and “escalate risk perception among investors.”

Shell had already started to see the writing on the wall. Earlier this year it was said that global oil demand is likely to have peaked in 2019 and will slowly decline in the years to come.

And at least compared to some of its American counterparts, Shell had set relatively more ambitious climate targets. It had already promised to reduce the carbon intensity of its operations, which means it can continue to grow oil and production, but with lower emissions for each barrel produced.

The district court ordered the company on Wednesday to reduce its absolute emissions by 45 percent by 2030 compared to 2019. The ruling applies to Shell’s global operations. But even if this is confirmed on appeal, enforcement could prove to be “impractical,” for example in Nigeria, where Shell is the largest oil producer, said Biraj Borkhataria, an analyst at RBC Capital Markets, an investment bank.

“However,” he said separately in a statement to customers on Thursday, “this is yet another example of society demanding more from oil companies.”

The Shell ruling is particularly noteworthy as private companies in the US and elsewhere have been the target of climate disputes, but courts have rarely ruled against them.

The Dutch case opens a potentially new front and encourages climate advocates to pursue more cases in a wider variety of countries, especially where national laws enshrine the right to a clean environment. Several European and Latin American courts, including the Netherlands, have interpreted their national laws in this way.

A farmer in Peru is suing a German energy giant over the effects of global warming on a glacier in his country. Approximately 20 American cities, counties, and states have sued the fossil fuel industry since 2017, seeking compensation for the local costs of climate change.

Governments are on the hook too.

The German Supreme Court recently called on the government to tighten its climate targets because they did not go far enough to ensure the protection of future generations.

In the Australian case, eight teenagers, along with Brigid Arthur, the nun, went to court to prevent the government from expanding a huge coal mine called Whitehaven. The court stopped issuing an injunction against the mine on Thursday, as plaintiffs had requested.

In directing the government to “take reasonable care to avoid harming children,” it recognized climate change as an “intergenerational crime,” said Michael Burger, executive director of the Sabin Center for Climate Change Law at Columbia University and attorney representing multiple US cities and states suing fossil fuel companies.

“The actions we are taking today about climate change can move our children, the children of our children and other future generations into a world that is fundamentally livable or a world that is not,” he said. “Courts recognize that.”

The most closely watched case in the United States, filed against the United States government on behalf of young people, seeks to establish a constitutional right to a healthy environment. Following recent setbacks in the federal courts, a federal judge ordered the parties to start settlement talks.

The measures against Chevron and Exxon are noteworthy as they show the extent to which shareholders are quick to see the risk of their investments being made unless energy companies change their business models dramatically.

A significant segment of shareholders indicated that they were increasingly suspicious that companies could deliver the expected financial performance without deviating from oil and gas.

Exxon lost a fight this week to a small new hedge fund, Engine No. 1, which brought together big investors like Blackrock and the New York State Pension Fund to force the company to change course. The hedge fund won at least two seats on Exxon’s 12-person board of directors.

Tensie Whelan, director of the Stern Center for Sustainable Business at New York University, called it “a crucial moment for board accountability”. Activist shareholders have traditionally taken on company executives on financial issues, not social issues like climate change, she said. “Shareholders are deeply concerned about the financial risks posed by climate change and increasingly willing to hold the board of directors accountable,” said Whelan.

Stanley Reed and John Schwartz contributed to the coverage.