Mid-way through 2021, the Hague District Court in the Netherlands ordered Shell (SHEL) – then Royal Dutch Shell – to reduce its worldwide CO2 emissions by 45 per cent by 2030. Within a year, the energy major had filed an appeal against the court ruling, but the die had been cast and subsequent lawsuits filed by environmental groups and NGOs over issues linked to lobbying and greenwashing demonstrate that the net-zero issue has moved decisively within the legislative realm.
In May this year, for instance, Greenpeace Italy and Re:Common – an environmental NGO – launched a civil lawsuit against Italian energy giant Eni (IT:ENI) for the climate damage wrought by the group’s continued support for fossil fuel production (obviously a no-no where oil companies are concerned).
Unfortunately, for the campaigners, it’s a two-way street. Within a couple of months, Eni had filed a Strategic Lawsuit Against Public Participation (Slapp) against the plaintiffs to counter their joint legal campaign. Slapps are typically framed as defamation cases brought by corporations or wealthy individuals to avoid scrutiny in the public interest.
In a separate, non-Slapp case, it has now emerged that Shell is suing Greenpeace for at least $2.1mn (£1.7mn) in compensation after the environmental group’s campaigners occupied a floating oil platform earlier this year. The claim – one of the largest ever of its kind – is linked to the cost of related legal injunctions, increased security, and the provision of an extra safety vessel. Greenpeace recorded total income of €103.7mn (£90.4mn) in 2022, whereas Shell booked revenues of $381bn – it pays to pick your battles wisely.
It’s doubtful whether any of the strategists at Greenpeace are looking to put the oil majors out of business through legislative channels. But they are looking to make a lot of noise and in doing so, heap pressure on institutional investors to pull support for the industry. By any measure, this strategy has proved effective both from governmental and corporate perspectives, as evidenced by the fact that many listed companies are now compelled to divulge climate risk information. See the EU's Corporate Sustainability Reporting Directive for one example.
However, there has been increased debate recently as to whether environmental, social and governance (ESG) provisions are now at ebb tide. Maybe it just comes down to semantics? Earlier this year, BlackRock (US:BLK) chief executive Larry Fink said that the asset manager would be abandoning the ESG terminology because it had become overly politicised. Nonetheless, the group has just announced that it will be pumping around $550mn into Occidental Petroleum’s (US:OXY) direct air capture project – a form of carbon capture. It probably doesn’t hurt that Warren Buffett’s Berkshire Hathaway (US:BRK-B) is Occidental’s largest shareholder, but perhaps Fink’s newfound reluctance to employ the argot of sustainability reflects the fact that people in the US started taking more notice of their dwindling 401(k) pension pots during last year’s stock market slump.
Just as likely it could have been the impact of Russia’s invasion of Ukraine, as discourse on climate change switched to energy security during the bleak northern hemisphere winter. So, while many companies continue to seek advice and consulting services to meet their ESG obligations, statistics indicate that the growth rate of ESG-themed digital branded content – a shorthand for marketing material – has plummeted since the first quarter of 2022. Exhaustion on the subject may have already set in. After all, withdrawals and redemptions were the order of the day for ESG stock, bond, and mixed-asset funds during 2022.
Closer to home, the UK government has granted approval for the opening of a coal mine for the first time in 30 years, while a bill intended to increase oil and gas licensing was recently confirmed in the King's Speech to Parliament. The King said that the focus will be on “helping the country to transition to net-zero by 2050 without an undue burden on households”. It’s obviously a sop to hard-pressed families, but it could also point to the direction of travel.
Shell’s tilt at Greenpeace could signal that corporations are reasserting their right to pursue legitimate business interests without undue interference from lobby groups. Yet governments and the private sector are still pouring billions into the net-zero transition. How all this will play out is difficult to predict, but the recent scandal at US electric truck manufacturer Nikola (US:NKLA), whose founder was subsequently convicted last year of defrauding investors, brought back memories of the fate of the DeLorean Motor Company in the 1980s – another beneficiary of interventionist industrial policy. One suspects that there could be other unpleasant surprises brewing for investors and taxpayers alike if the avalanche of well-intentioned capital is imprudently allocated. We shall see.
