Finally, Some Amazingly Good News in the Battle Against Climate Change.

Activists celebrate a Dutch court’s sweeping ruling. Photo by Reuters

It’s so rare to hear any positive news about climate change that when it breaks, we should celebrate it. And when the news happens in threes, as many things do, we should take a deeper dive and see if we can get more of that, please.

The first piece of good news is a thunderclap from a trial court in The Hague in a case brought by seven foundations and over 17,000 individual claimants. In its remarkable ruling, a panel of judges ordered Royal Dutch Shell, which is based in the Netherlands, to reduce its carbon emissions by 45 percent by the year 2030. (The company accounts for around three percent of total global carbon emissions, according to the lawsuit.) The court found that the company had helped drive “dangerous climate change” and held it to an “unwritten standard of care” based on the facts, global consensus, and internationally accepted standards. Its central reasoning is worth noting:

The Shell group is one of the world’s largest producers and suppliers of fossil fuels. The CO2 emissions of the Shell group, its suppliers and customers exceed those of many countries. This contributes to global warming, which causes dangerous climate change and creates serious human rights risks, such as the right to life and the right to respect for private and family life. It is generally accepted that companies must respect human rights. This is an individual responsibility of companies, which is separate from states’ actions. 

Beyond the potential impact this has on the company itself (Shell will appeal the ruling, so nothing will happen right away), the case is important for two very big reasons. The ruling is the first to hold that a private company can be held responsible for the catastrophe of global climate change and must reduce its emissions just as a country is obligated to do. And, more ominously for energy companies generally, the ruling is likely to encourage copycat actions across the world to hold big carbon emitters legally responsible and enforce reductions.

Just hours after the announcement of the ruling, a second big story broke at another energy behemoth, Exxon Mobil. During its annual shareholder meeting, a major shakeup to the Board of Directors occurred, despite the company spending a whopping $35mil to try and prevent it. Specifically, an upstart activist investor group called Engine No. 1 succeeded in forcing at least two corporate leaders with renewable energy bona fides on to the 12-member Board of Directors of the company. 

Engine No. 1 had complained that Exxon has failed to commit itself sufficiently to cleaner energy from wind, solar or other sources, especially compared to efforts by other big energy companies. Exxon countered that it was already addressing the climate crisis, including existing plans to add board members with expertise in climate change.

A majority of shareholders were unconvinced. Notably, dissident shareholder effort was supported by BlackRock, the world’s largest asset management fund and Exxon’s second-largest shareholder. BlackRock threw its weight behind three out of four of Engine No. 1’s nominees, with two succeeding and the third candidate’s votes still being counted.

Why would climate activists and big investment funds suddenly find common cause? Here is the thing: BlackRock agreed that the failure of Exxon to change its business strategy was endangering profits. In other words, it was in BlackRock’s own financial interest to force Exxon to change its ways. And developments like the Shell ruling earlier that day likely added fuel to Engine No. 1’s arguments.

The third shock hit at another shareholder meeting this week, this one for the energy company Chevron. There, shareholders resoundingly approved, by a whopping 61% in favor, a resolution calling on the company to reduce its energy product (or “Scope 3”) carbon emissions. Importantly, this was a shareholder-initiated proposal that the company had specifically recommended against. It passed anyway. The argument deployed in the resolution is notable:

As shareholders, we understand this support to be part of our fiduciary duty to protect all assets in the global economy from devastating climate change. Climate-related risks are a source of financial risk, and therefore limiting global warming is essential to risk management and responsible stewardship of the economy.

We therefore support the Company to reduce the emissions of their energy products (Scope 3). Reducing emissions from the use of energy products is essential to limiting global warming….

Shell, BP, Equinor, and Total have already adopted Scope 3 ambitions. Backing from investors that insist on reductions of all emissions continues to gain momentum; in 2020, an unprecedented number of shareholders voted for climate resolutions. It is evident that a growing group of investors across the energy sector is uniting behind visible and unambiguous support for reductions of all emissions.

In other words, as with Exxon, institutional shareholders of Chevron cited their own financial risks and the need for risk management of their vast global assets as grounds for carbon emission reductions at the energy company.

With financial and legal pressures now building both externally and from within, large energy companies are facing a moment of reckoning. Litigation risks, shareholder revolts, and changes in the make-up of their boards are effective ways to force issues to be addressed by large corporations. It’s hard to imagine that a CEO of any energy company wouldn’t see the clear signal these three separate but related events just sent. As with humanity’s response to the climate crisis, these companies will also have to change course or face inevitable disaster, decline and destruction.