Big Setbacks Propel Oil Giants Toward a ‘Tipping Point’

A surprising mix of environmentalists, pension fund managers and big-money investors have won a shocking victory against oil and coal, opening up new war fronts in the climate battle.

A nun, an environmental lawyer, pension fund official and the world’s largest asset manager. These were among the unusual collection of rebels who claimed a shocking victory against some of the world’s largest and most influential fossil fuel companies this week.

From Houston to The Hague, they fought their battles in shareholder meetings and courtrooms, opening surprise fronts in a swift attempt to force the world’s coal, oil and gas companies to address their central role in the climate crisis. And even when he came up with a surprisingly different view – corporate shareholders, advocates for children’s rights, environmentalists, thousands of Dutch citizens – he delivered a common underlying message: Time to step back from the fossil fuel business Not in the future, but now.

“These companies are facing pressure from regulators, investors and now the courts,” said Will Nichols, head of environmental research at the risk analysis firm Maplecroft. “It is a big part of society, and it is not a good sight to retreat against all of that.”

The most dramatic turn came in the Netherlands, where a court directed Royal Dutch Shell, the world’s largest private oil trader and by far the largest company in the Netherlands, to sharply cut greenhouse gas emissions from all its global operations . This decade. It was the first time a court had ordered a private company to change the behavior of its business based on climate.

Symbolism was unavoidable: The Netherlands, which is famous on land derived from the sea, faces immediate danger from the hot climate caused by the burning of its own products – oil and gas.

In another example this week, at the annual shareholder meeting of Exxon Mobil, the largest US oil company, the message was sharply framed in terms of profit: a small new hedge fund sparked an investor revolt away from oil and gas Led to – or risk hurting investors and the bottom line.

Chevron shareholders asked the company not only to reduce its own emissions, but remarkably, the emissions produced by customers that burn its oil and gasoline. And in Australia, a judge warned the government that the 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 nation’s children.

Time was important. This week, scientists also concluded that, over the next five years, the average global temperature will be at least Spike temporarily beyond a dangerous range, Climbing over 1.5 ° C or 2.7 ° F, warmer than pre-industrial times. Avoiding that limitation is the main objective of the Paris Agreement, a historic global climate agreement between countries of the world to fight climate change.

Of course, none of these actions represent an immediate threat to the fossil fuel industry. For a century and a half, the global economy has been driven by oil and coal, and this will not change immediately.

Nevertheless, a similar decision in the Netherlands could be a precursor to similar legal attacks against other fossil fuel companies and their investors, experts said. Economist Kate Raworth of Oxford University reports Shell’s loss in court “A social tipping point” Towards a Fossil-Fuel-Free Future. “

Shell said the decision given by a district court in The Hague was found to be “disappointing” and intended to appeal. That process may take years to reach the country’s Supreme Court, action is delayed but is constantly attracting public attention.

If the lower court ruling is upheld, however, analysts said, Shell would certainly have to re-orient its business to reduce oil in its portfolio and curb its growth in liquefied natural gas, with Shell being one Is the industry leader. This is a concern for investors who have money in the oil and gas reserves of companies like Shell, Professor Patrick Parento of Vermont Law School said. “A decision is telling a company, ‘You have to get out of the oil business.’ For vigilant individuals within the financial community, it is a matter of serious concern for them. “

Dangerously for Shell, the Netherlands’ national judiciary has in the past shown itself to be at the forefront of climate litigation. In 2019, the Netherlands Supreme Court ordered the government to cut greenhouse gas emissions due to a lawsuit filed by Urgenda, an environmental group. It was the first case in the world that forced a national government to address climate change in order to maintain its human rights commitments.

That case also began in a district court in The Hague, before climbing the judicial ladder. The lawsuit against Shell marked an increase in that strategy.

After suing the government and winning, environmental advocates decided to take one of the country’s most influential companies. The case was brought up in 2019 by the Dutch branch of Friends of the Earth, Milliudefense, as well as Greenpeace and 17,000 residents of the Netherlands. The complainants argued that the company has a legal duty to protect Dutch citizens from climate risks. The district court agreed.

“The consequences of this case will be systemic and immediate for the fossil fuel industry,” lawyer Tessa Khan, who sued the government on behalf of Urgenda, said on Twitter. She predicted that it would boost other matters and “increase the perception of risk among investors.”

The shell was already beginning to appear written on the wall. It said earlier this year that global oil demand is likely to peak in 2019 and will gradually reduce in the coming years.

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

The district court on Wednesday directed the company to cut its absolute emissions by 45 percent by 2030 relative to its 2019 levels. The decision applies to Shell’s global operations. But, it said, even if it was upheld on appeal, implementing it, say, in Nigeria, where shale is the largest oil producer, could prove to be “impractical”, Biraj, an analyst at RBC Capital Markets Said Borkhataria, an investment bank.

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

The Shell regime is particularly notable because private companies have been targets of climate litigation in the United States and elsewhere, but courts have rarely ruled against them.

The Dutch case potentially opens a new front, encouraging climate advocates to pursue more cases in a wide variety of countries, particularly where national laws ensure the right to a clean environment. Many 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 veteran for the effects of global warming on a glacier in his country. About 20 US cities, counties and states have sued the fossil fuel industry since 2017 and have sought damages for local costs of climate change.

Governments are also on target.

Germany’s supreme court recently asked the government to toughen its climate goals because they were not enough to ensure that generations to come could be protected.

In the Australian case, Eight teenagers, Brigadier Arthur, joined by nuns, Went to court to stop the government from expanding a huge coal mine called Whitehaven. The court on Thursday barred the issuing of injunction against the mine, as demanded by the plaintiff.

But ordering the government to “take reasonable care to avoid personal injury to children”, it recognized climate change as an “inter-generational crime”, executive director of the Sabin Center for Climate Change Law at Columbia University and Said Michael Berger, a lawyer. Which represents several US cities and states that are suing fossil fuel companies.

He said, “The action we take today in relation to climate change can send our children, our children’s children and generations to come into a world that is basically habitable or a world that is not . ” “The courts consider it.”

The most commonly seen case of youth in the United States, filed against the United States government, seeks to establish a constitutional right to a healthy environment. Following a recent setback in federal courts, a federal judge has ordered the parties To enter into settlement discussions.

The action against Chevron and Exxon is notable as they reveal the extent to which shareholders are waking up to the risk that their investment if energy companies do not begin to dramatically change their business models.

A significant portion of shareholders demonstrated that they were increasingly distrustful that companies could expect financial performance without turning away from oil and gas.

Exxon lost a battle this week against a small new hedge fund, Engine No. 1, which rallied large investors such as Blackrock and York State Pension Fund to force the company to change course. The hedge fund won at least two seats on Exxon’s 12-member board.

Tencey Whelan, director of the York University Stern Center for Sustainable Business, called it “an important moment for the board’s accountability”. Activist shareholders have traditionally taken company executives on financial issues, not social issues such as climate change, she said. “Shareholders are deeply concerned about the financial risks posed by climate change and are willing to hold the board to account,” Ms Whelan said.

Stanley Reid And John schwartz Contributed to reporting.

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