Small investors taking on oil giants

Small investors taking on oil giants

(NYTIMES) – A nun, an environmental lawyer, pension fund executives and the world’s largest asset manager. These are among the unusual collection of rebels who have claimed a series of startling victories against some of the world’s biggest and most influential fossil fuel companies.

From Houston to The Hague in the Netherlands, they fought their battles in shareholder meetings and courtrooms, opening surprising fronts in an accelerating effort to force the world’s coal, oil and gas firms to address their central role in the climate crisis.

And even as they came with strikingly disparate points of view – corporate shareholders, children’s rights advocates, environmentalists, thousands of Dutch citizens – they delivered a common underlying message: The time to start retreating from the fossil fuel business is no longer in the future, but now.

“These companies are facing pressure from regulators, investors, and now the courts to up their game,” said Mr Will Nichols, head of environmental research at Maplecroft, a risk analysis firm. “That’s a big chunk of society, and it’s not a great look to be pushing back against all of that.”

The most dramatic turning point came in the Netherlands, where a court instructed Royal Dutch Shell, the largest private oil trader in the world and by far the largest company in the Netherlands itself, that it must sharply cut greenhouse gas emissions from all its global operations this decade. It was the first time a court ordered a private company to, in effect, change its business practice on climate grounds.

The symbolism was inescapable: The Netherlands, famously built on land reclaimed from the sea, faces the immediate threat from a warming climate caused by the burning of Shell’s own products – oil and gas.

In another example, at the annual shareholder meeting of ExxonMobil, the biggest American oil company, the message was framed sharply in profit terms: A tiny new hedge fund led an investor rebellion to diversify away from oil and gas – or risk hurting investors and the bottom line.

Chevron’s shareholders voted to tell the company to reduce not only its own emissions, but also, remarkably, the emissions produced by customers who burn its oil and petrol.

And in Australia, a judge warned the government that a proposed coal mine expansion, a project challenged by eight teenagers and an 86-year-old nun, would need to ensure that it would not harm the health of the country’s children.

The timing was significant. Scientists have concluded that, in the next five years, the average global temperature will at least temporarily spike beyond a dangerous threshold, climbing more than 1.5 deg C, warmer than in pre-industrial times. Avoiding that threshold is the main objective of the Paris Agreement, the landmark global climate deal among the nations of the world to fight climate change.

Of course, none of these actions represents an immediate threat to the fossil fuel industry. For a century and a half, the global economy has been fuelled by oil and coal, and that will not change right away.

Nevertheless, rulings like the one in the Netherlands could be a harbinger for similar legal attacks against other fossil fuel firms and their investors, experts said.

Ms Kate Raworth, an economist at Oxford University, called Shell’s loss in court “a social tipping point for a fossil-fuel-free future”.

Shell said it found the ruling, by a district court in The Hague, “disappointing” and intended to appeal. That process could take years to reach the country’s Supreme Court, delaying action but also drawing continued public attention.

If the ruling of the lower court stands, though, analysts said, Shell would most certainly have to reorient its business to reduce oil in its portfolio and halt its growth in liquefied natural gas, in which Shell is an industry leader.

That is a matter of concern for the investors who have their money in the oil and gas reserves of companies like Shell, said Professor Patrick Parentea of Vermont Law School.

“A decision telling a company, ‘You’ve got to get out of the oil business’. For cautious individuals within the financial community, that’s got to cause them serious concerns.”

Dangerously for Shell, the national judiciary of the Netherlands in the past has shown itself to be among the most out-front on climate litigation.

In 2019, the Supreme Court of the Netherlands ordered the government to cut greenhouse gas emissions because of a lawsuit filed by Urgenda, an environmental group. It was the first case in the world to force a national government to address climate change in order to uphold its human rights commitments. That case, too, began in a district court in The Hague, before making its way up the judicial ladder.

The lawsuit against Shell marked an escalation in that strategy. Last month, the district court instructed the company to cut its absolute emissions by 45 per cent by 2030, relative to its 2019 levels. The ruling applies to Shell’s global operations.

But, that said, even if it is upheld on appeal, enforcing it, say, in Nigeria, where Shell is the biggest oil producer, could prove to be “impractical”, said Mr Biraj Borkhataria, an analyst at RBC Capital Markets, an investment bank.

“It is another example of society asking more from oil companies,” he said.

Governments are also on the hook.

Germany’s highest court recently told the government to tighten its climate targets because they did not go far enough to ensure that future generations would be protected.

In the Australian case, eight teenagers, joined by Ms Brigid Arthur, the nun, went to court to stop the government from expanding an enormous coal mine called Whitehaven. The court stopped short of issuing an injunction against the mine, as the plaintiffs had sought.

But in ordering the government to take “reasonable care to avoid personal injury to the children”, it recognised climate change as an “intergenerational crime”, said Mr Michael Burger, executive director of the Sabin Centre for Climate Change Law at Columbia University and a lawyer who represents several US cities and states suing fossil fuel companies.

“The actions we take today with respect to climate change can consign our children, our children’s children, and other future generations to a world that is fundamentally liveable or a world that is not,” he said. “Courts recognise that.”

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