"Precedent-setting" Case Highlights Risk For Corporate Directors

Now that corporate directors may face personal liability for ESG failures, boards are likely wondering what they can do to mitigate their risk.

Last week, ClientEarth filed a lawsuit against the 11 directors of Shell plc, alleging they were personally liable for the energy giant's failure to set meaningful emissions reduction targets to achieve net zero.

"It's precedent-setting," Conor Chell, head of the MLT Aikins ESG practice group, said of the lawsuit. "We haven't seen personal liability before in this context."

Speaking at the Law Society of Ontario's In-House Counsel Summit in Toronto on February 16, Conor noted a large number of Shell's institutional investors support ClientEarth's lawsuit. Other activist investors – such as Engine No. 1, which waged a successful battle to replace three of Exxon Mobil Corporation's directors – have also received widespread support from institutional investors.