Introduction
In May 2023, the High Court rejected ClientEarth’s landmark lawsuit against Shell’s Board of Directors over climate risk mismanagement. The application reflects an anticipated trend of litigation in the climate space, as activists seek to use the courts and derivative actions under section 172, as an avenue to hold corporations accountable to their goals of net zero. The case arises as the threat of climate change becomes increasingly existential and visible. Within four years, the world has witnessed approximately 20 million climate-related deaths,1 record heatwaves in the UK,2 and new global emission records.3 The fact that 71% of global emissions can be pinpointed to just 100 companies, demonstrates the irreversible handprints corporations have burnt into the climate landscape.4 On the other side of the coin, it also demonstrates that environmental regulations on corporations may hold the key to systemic change.
Specifically, directors, as the ultimate decision-makers on climate management strategies, could play a vital role. Thus far, directors’ duties, as a regulatory response to climate change, have been largely neglected in discourse, and its potential is disappointingly under-utilized in current company law.5 Under the classical model of corporate governance, ESG has been deemed a mere ‘carrot and stick metaphor’, in which companies are forced to act sustainably (the stick) to maximise profits and shareholder value (the carrot).6 Section 172 of the UK’s Companies Act 2006 seeks to enshrine a broader and more evolved version of this traditional shareholder-centric model – a concept rebranded in literature as ‘Enlightened Shareholder Value’ (ESV).7 Yet, the actual, tangible extent of this alleged enlightenment is questionable. ClientEarth v Shell Plc constitutes the ‘first-of-its-kind’ case to fully test this theory.8 As such, this case crucially prompts a re-evaluation of how directorial duty is construed under section 172.9
This article begins by examining the embodiment of ESV in UK company law. Subsequently, it considers the limitations of the current approach to directorial duties, through the lens of ClientEarth v Shell Plc.10 Finally, the article will conclude that statutory reform is necessary for company law to fulfil its potential in battling climate change.
Section 172: The ‘Enlightened Shareholder Value’ Principle
Background
Since the Hallmark case of 1878 which indicated that ‘directors are trustees for the shareholders’, shareholder primacy had been promoted as the guiding principle on corporate objectives.11 In accordance with this principle, famously espoused by Friedman, corporations are accountable only to their shareholders, and prioritising the interests of any other party would amount to ‘theft’.12 This theory is based on the premise that shareholders, as residual claimants of companies, ultimately bear the risk if the company fails.13 However, taking a wider view of the corporation, critics argue that this assertion is outmoded when, in today’s reality, there are numerous other constituent interests that are affected by the company manager’s decisions ex post facto. This gives rise to the stakeholder theory which holds that directors should be accountable to a broader range of stakeholders. Freeman defines the ‘stakeholder’ demographic as ‘any group or individual who is affected by or can affect the achievement of an organisation’s objectives’.14
Traditionally, the tension between both theories remained unresolved, as the scope of company interests was left largely to the subjective ‘discretion bona fide’ of the directors, as per Re Smith & Fawcett Ltd.15 Accordingly, the Department of Trade and Industry initiated a reform process attempting to clarify judicial diffidence. They sought to strike the appropriate balance between the stakeholder-shareholder dichotomy through the creation of ‘Enlightened Shareholder Value’ (ESV). Under ESV, shareholder-oriented ideologies were preserved against a more ‘inclusive model embracing long-termism’.16
Conceptual Limitations
Section 172 of the Company Act 2006 (CA) enshrines the ESV concept in legislation. Under section 172(1), the primary directorial duty is to ‘promote the success of the company for the benefit’ of its shareholders and, in doing so, ‘have regard’ to the long-term implications of decisions on other stakeholders in the company, including customers, employees, the community, and the environment at large.17 As such, advancers of the bill claim it ‘enlightens’ the Shareholder Value (SV) concept by widening the scope of company interests so as to shift directorial focus from the ‘short-term financial bottom line’ to ‘long-term prosperity’.18
Indeed, section 172 does hold great significance – at least nominally, as it marks the first statutory appearance of environmental concerns in UK company law. However, it is conceptually limited. Firstly, section 172 fails to uphold its stated purpose to better the ‘growth, and prosperity of, the economy with sustainability and social justice’.19 This is evidenced by the fact that, four years after the implementation of the CA, UK publicly listed companies recorded no less than 6,222 environmental violations.20 Southern Water Services currently holds the largest individual penalty amount, after being handed a record £90 million fine after pleading guilty to thousands of illegal discharges of sewage that polluted rivers and coastal waters, in 2021.21 Further, whilst it should be noted that there are increasing attempts by UK companies to integrate ESV in their business practices — such as complying with mandatory disclosure requirements — this, in itself, is not definitive evidence of section 172’s success in fulfilling its objectives. A study, based on the annual sustainability reports of 16 large UK companies listed on FTSE 100, such as Tesco plc, AstraZeneca plc, and Aviva plc,22 cites the sustainability initiatives of the respective companies but fails to acknowledge that those 16 companies and their subsidiaries, caused 170 violations between 2010 and 2022.23 The failure of ESV to fulfil its outlined objectives prompts a re-evaluation of section 172.
Secondly, ESV encourages a restrictive mindset, commonly referred to by theorists as ‘doing well by doing good’.24section 172 only prompts directors to self-servingly ask how sustainability might contribute to their company’s profitability, as opposed to how a company might contribute to the sustainability movement. To argue that this is an inherently problematic mindset would be moralistic. Yet, as Bradshaw notes, it is dangerous to assume a ‘ready compatibility’ between environmental concerns and shareholder wealth maximisation.25 When financial rationale becomes the core basis for companies to act in an environmentally friendly way, it is only too easy, as demonstrated by the widespread environmental violations cited in the data above, for the same logic to apply the other way around. This reveals a fundamental conceptual limitation in the ESV principle. Based on this concept, environmental concerns are simply pushed into existing theories of directors’ duty, reducing stakeholder interests into a ‘purely instrumental concern with constituency interests’.26 Furthermore, in cases where directors must balance conflicting interests, a clear expectation that they prioritise shareholder interests above all else is embedded into the wording of the statute and in the CLRSG’s report which explicitly subordinates stakeholder interests to SV.27 In a society where over 76% of UK voters and consumers are demanding that corporations be legally responsible for the social and environmental impacts, the single-value commercial approach that section 172 promotes has become anachronistic and ineffective.28
Practical Limitations
A second significant obstacle undermining the impact of section 172 resides in its barriers to enforcement. Within the limited judicial consideration of section 172(1), Warren J in Cobden Investments v Langport held that ‘it is accepted that a breach will have occurred if it is established that the relevant exercise of power is one which could not be considered by any reasonable director to be in the interests of the company’.29 However, in reality, the statute’s lack of enforceability renders the position of directors ‘virtually unassailable’.30
Given that the duty owed under section 172(1) is directed at the company itself, non-shareholders lack direct access to enforcement mechanisms.31 Instead, non-shareholders must rely on members to bring a derivative claim which involves a claim made by shareholders, on behalf of the other members, regarding a cause of action vested in the company. The high costs and procedural complexities of such claims disincentivise would-be claimants — this is further compounded by the risk that the shares that members hold will decrease in value: recent research indicates that the mere initiation of climate litigation reduces firm value by -0.41% on average.32
In the unlikely event that the ‘general body of shareholders is uncharacteristically selfless’, the wording of the statute renders it improbable that a court would grant permission for such a claim to proceed.33 The provisions of section 172 require that the director act in a way that ‘he considers, in good faith’ would promote the success of the company. Davies and Worthington note the difficulty of proving a director has acted against their personal subjective judgment without a ‘clear record of their thought processes leading up to the challenged decision’.34 Okoye correctly argues that the required consideration of environmental factors is invariably qualified by the personal judgment of directors which, provided that their personalities have not abruptly changed, remain the same before and after the enactment of section 172.35 Thus, the substantive and procedural barriers to enforcing the only sanction for non-compliance under section 172 further undermine its actual impact on directorial behaviours.
The conceptual and practical limitations suggest that ‘ESV’ appears only to be ‘enlightened’ when environmental and shareholder interests coincide. Beyond this, there seems to be little evidence of differentiation, at least in practice, between shareholder primacy and Enlightened Shareholder Value. Yet, it does not necessarily follow that the identified deficiencies render section 172 redundant. Indeed, it has been argued that the ambiguities within the provision, such as the non-exhaustive list of considerations it presents and its undefined terms, lend the necessary flexibility to maintain efficient business decision-making whilst enabling courts to intervene when necessary.36 For example, Kabour suggests that ESV provides normative impact, in its promotion of long termism.37 Such a claim is difficult to substantiate unless the courts were to clarify the meaning of the terms used in the provisions, such as interpreting ‘success’ to be determined by the long-term increase in value. However, until now, there has been little case law in this sphere to definitively identify the position of the courts, and subsequently, conclude otherwise. The entry of ClientEarth v Shell, therefore, is salient when considering whether the status quo should be displaced.38
ClientEarth v Shell plc
It should firstly be noted that prior to Shell, this discussion has been relatively uncharted by judicial opinion due to the lack of caselaw.39 To date, therefore, ClientEarth v Shell Plc offers the most definitive insight into the judicial approach to s172 derivative claims and, more broadly speaking, climate litigation. The case is the ‘first known attempt to hold a company’s directors personally liable for failing to properly manage climate risk’.40 ClientEarth, an environmental NGO and minority shareholder in Shell, sought permission to continue a derivative claim on the grounds that the board of directors had breached section 172 (the duty to promote the success of the company for the benefit of its members),41 alongside section 174 (the duty to exercise reasonable care, skill, and diligence) of the CA 2006.42 In its first stage, the court was required to ascertain whether ClientEarth’s submissions disclosed a prima facie case, necessary to proceed with a substantive application to pursue the derivative claim. In the first hearing, (the ‘May order’), Justice Trower concluded that the claimant had failed to establish a prima facie case.43 The same judgment was reached upon reconsideration of this decision at the oral hearing three months later.44 This article will argue that by focusing on the court’s stance on derivative actions, and the formulation of directorial duties, the conservative approach adopted by the courts demonstrates that genuine ESV concepts are unlikely to come to fruition and by extension, that section 172 lacks utility.
Derivative Action
Under s261(2)a of the CA 2006, any application to make a derivative claim will be rejected by the High Court if a prima facie case cannot be established.45 Providing a statutory basis for derivative actions, in theory, seemed to broaden the circumstances in which a claim could be brought: for example, shifting from the common law position, the CA enables derivative claims brought based on breaches of duty, regardless of whether the directors benefit from their alleged wrongdoing. However, it remains doubtful whether any significant extension of derivative actions has occurred in practice.
Fundamentally, the continuance of significant judicial discretion over granting permission for derivative claims means that litigants still face the ‘traditional suspicion of the English courts towards such claims’.46 This caution is encapsulated in the list of discretionary factors that the Court may consider, notably the ‘good faith’ of the shareholder claimants.47 This heavily undermines shareholder activism, in which activist organisations acquire shares in companies for the purpose of imitating climate litigation which, it should be noted, is one of the sole avenues in which a derivative claim is likely to be brought.
The de minimis extent of ClientEarth’s shareholder interest in the company, with a total of 27 shares, was adduced to explain that their application was driven by an ‘ulterior motive’ to advance their own policy agenda, and not how to promote the success of the company.48 Justice Trower applied the ‘but-for’ test to reach this conclusion.49 In doing so, the court reinforces shareholder primacy: it is insufficient that protecting shareholder value and protecting environmental concerns may be equal considerations for a claimant – the former must be prioritised as the ‘primary purpose’.50 The fact that the Court expected ClientEarth to adduce ‘sufficient evidence to counter the inference of collateral motive’ imposes an undue obligation on plaintiff shareholders to demonstrate good faith.51 This is congruent with the significant onus the High Court places on the shareholder from the outset: ‘a prima facie case is a higher test than a seriously arguable case’52 and must be ‘exceptional’.53
It is therefore clear that despite any ostensible permissive language the statutory derivative claim regime may employ, such claims are impeded from proceeding as a result of the strict approach of the courts, bolstered by ‘restrictive legislation’ which serves to ‘justify their attitudes’.54
Business Judgement
The High Court rejected the notion that Shell had breached s172 and s174 on the basis that ClientEarth’s submissions ‘conflated irrationality and good faith, treating them as interchangeable concepts’.55 In essence, the court concluded that the irrationality of decision-making is a consideration merely supplementary to whether the director concerned acted in good faith. This imposes an even greater evidential burden on the applicants: state of mind is entirely subjective and, therefore, far more challenging to prove than the more objective question of whether the specified conduct can be deemed irrational. The philosophy that manifests here echoes the earlier, pre-s172, case — Re Smith & Fawcett Ltd — in which Lord Green deferred to the ‘discretion bona fide’ of directors_,_ suggesting that there has been negligible change in the court’s position since 2006.56
The court’s clear favour for a subjective test arises from an implicit business judgement rule.57 Essentially, Justice Trower explains that a more objective approach would entail that the courts transcend their domain, shifting into a kind of ‘supervisory board over decisions within the power of management’.58 In arriving at this conclusion, the Court relied on well-known English dicta in Howard Smith v Ampol Petroleum Ltd: ‘there is no appeal on merits from management decisions to courts of law’.59 The court’s commitment to this ‘well-established principle’ manifests again in Justice Trower’s rejection of imposing specific obligations on directors that concern how the company tackles climate risk.60
ClientEarth formulated six incidental duties which include an obligation to adopt strategies which are ‘reasonably likely to meet Shell’s targets to mitigate climate risk’, and to ‘implement reasonable measures to mitigate the risks to the long-term financial profitability and resilience of Shell in the transition to a global energy system and economy aligned with the global temperature objective of 1.5°c under the Paris Agreement on Climate Change 2015’.61 ClientEarth submits that these duties arise as a corollary of Shell’s recognition that its climate strategy is a ‘commercial objective … most likely to promote the success of the Shell’, reflected in its commitment to becoming a Net Zero energy business by 2050.62 The High Court deemed a ‘fundamental defect’ in this submission to be its neglection of the ‘fact that the management of a business of the size and complexity of that of Shell will require the Directors to take into account a range of competing considerations’.63 Following the ‘implicit business judgement rule,’ Trower argued that the balancing of these competing considerations is ‘essentially a commercial decision’ for the boards’ discretion, and one which the court is ‘ill-equipped’ to answer.64
ClientEarth’s case is based on their argument that the Board’s current approach ‘falls outside the range of reasonable responses to climate change risk’.65 However, the court seems to impose a higher evidential burden on applicant shareholders: ‘the evidence does not support a prima facie case that there is a universally accepted methodology as to the means by which Shell might be able to achieve the targeted reductions referred to in it’.66 This suggests that the conduct in question has to be one that no board member would consider to be in the interest of the company.
The court’s insistence that corporate boards retain discretion over how they discharge their duties to address climate change remains concordant with the judiciary’s abstinence throughout case law from second-guessing boards on business matters.67 However, arguably, this approach shows excessive deference to the decisions of corporate boards. As Keay notes, it is inevitable that courts engage with the merits of corporate decisions on some level, as ‘every examination by a judge of [decisions made by directors] will often involve, to some extent, second-guessing the judgments made by directors’.68
Therefore, ClientEarth v Shell serves as a kind of ‘reality-check’.69 As the ‘first-of-its-kind’ landmark case to address the manner in which directors discharge their duties to mitigate climate risk, the case has concentrated a mass of hope from climate activists. Yet, these expectations have ultimately been frustrated. The imposition of significantly high onuses to prove good faith and breach of duty indicate from the outset the court’s reluctance to intervene in climate-related corporate decision-making. Crucially, Shell demonstrates that when afforded the leeway to interpret the provisions concerned, the courts will choose to maintain their generally cautious stance towards climate litigation, demonstrating the failure of section 172 to fulfil its objectives and have impact. That the application fell at the first hurdle indicates a bleak future for climate litigation under the UK’s current approach. As the ruling stands, it appears that successful claims would be limited to ‘rather extreme or egregious cases of climate agnosticism on the part of corporate boards’.70 It is, therefore, necessary to consider potential reforms in this sphere, aimed at tackling the current barriers to bringing a successful derivative claim under section 172.
Navigating the Path Forward
Demands for legal change have been stifled by anti-reformist sentiment. Proponents for maintaining the status quo argue that statutory reform is unnecessary because social norms, market forces and the expanding ESG movement serve as pressures, instead, for corporations to behave environmentally friendly. However, as Richardson notes, the market economy contains no innate mechanism to cater for systemic and long-term risks.71
On a less pragmatic level, there remains reluctance to ‘undermine’ shareholder primacy, as the ‘foundation’ of corporate governance which Bradley hails has ‘secured for the world an unprecedented creation of wealth and prosperity, broadly shared across the globe over the past 200 years’.72 Yet, it is exactly this view that has justified the rise of a shareholder-centric business model as a way of contributing to the overarching goal of increasing societal welfare, measured overwhelmingly in terms of material wealth.73 Even if shareholder primacy once was a cornerstone of corporate governance, it is becoming an ‘anachronism in a world focused on sustainability and wider responsibility’.74 The legislature took tentative steps in enshrining an ‘Enlightened’ Shareholder Value in statute. Now, in order for its potential impact to be translated into practice, it must go further to address the conceptual and practical deficiencies in section 172. Widespread reform initiatives, notably the Better Business Act Campaign, suggest that there is a wind of change.
A Better Business Act
The Better Business Act Campaign (BBAC), currently supported by over 2,000 businesses, entails an amendment of section 172 with two key changes.75 Firstly, the BBAC seeks to transform the duty to promote the success of the company into the ‘duty to advance the purpose of the company’, retaining the six factors listed in s172(1) as necessary considerations.76 As such, the importance of environmental considerations to the wider purpose of the company is emphasized, as opposed to how it merely serves to benefit the interests of shareholders. This essentially deconstructs the hierarchical chain of interests in the original section 172 and places shareholder interest as equal to other considerations. Thus, ‘in situations where a director has to choose between the company’s intention to create positive social or environmental impacts and the interests of shareholders, directors would no longer be compelled to default to prioritising shareholders’.77
Secondly, the BBAC defines corporate purpose as providing benefits to its members ‘whilst also operating in a manner’ which betters ‘wider society and the environment’ and strives to eliminate the ‘harms and costs’ that the company creates on ‘wider society and the environment’.78 This change would be a formal legal recognition of a sustainable corporate purpose, displacing the classical purpose of shareholder wealth maximisation. The BBAC also enables corporations to dictate their own specified purpose, with the caveat that this must be ‘more’ environmentally beneficial than the default purpose that the BBAC outlines.79 This restriction fetters the essentially undiluted discretion of directors to pursue profit-maximising interests over all else. Further, by clarifying what a corporate purpose should entail, claims for breach of directorial duties are more likely to succeed because judges have a more substantive basis from which to measure the extent at which directors have fulfilled their duty.
Yet, without the appropriate enforcement mechanisms, any potential positive impact the BBAC has to prompt businesses to pursue regenerative principles remain limited. As such, it is also necessary that the statutory derivative action scheme is reformed. Keay contrasts the lack of applications for derivative claims in the UK with New Zealand where the derivative claim has become ‘popular… manifested by the number of proceedings instituted’.80 Key differences in both nation’s derivative proceedings is that New Zealand provides greater incentives for shareholders as it is the shareholders, as opposed to the company, who receive any court-directed payments,81 and if a shareholder’s action is admitted then he or she will be indemnified.82 The UK statutory derivative scheme should mirror the New Zealand jurisdiction by establishing a mandatory indemnity order and providing personal financial rewards for shareholder claimants. It could further extend locus standi by establishing multiple derivative claims which arise when a shareholder in a parent company brings a derivative claim on behalf of a subsidiary or associate company within a group of companies. This would provide a mechanism to ensure that ‘wrongdoers are not insulated from liability through the use of additional corporate layers and their control of the corporate structure’.83
Conclusion
ClientEarth v Shell Plc is a seminal case. Being the first litigation to test the extent that shareholder value has truly become ‘enlightened’ under section 172, it has been closely watched in the climate change space. Climate activists have proclaimed the case as a huge ‘setback’ and disappointment.84 However, the case serves a salient function. It demonstrates that there are significant impediments to ‘climate justice’ as the legislation currently stands. Courts cannot be relied upon to take a less restrictive and more ‘activist’ stance; and this is not a position that they should be expected to assume given the Separation of Powers model that the UK functions under. Change must start with statutory reform. Whilst the Better Business Act Campaign is a positive step in the right direction, the multi-faceted deficiencies of the UK’s current approach entail that a single reform is starkly insufficient. The way forward must target both the conceptual and practical barriers to bringing a successful derivative claim. Therefore, a synthesis of reforms which address these deficiencies, such as clarifying statutory language as well as incentivising shareholders to bring derivative actions, provides the most effective solution.
Fundamentally, maintaining the status quo is not a luxury that can be afforded. The very basis of human existence and the world we inhabit depend on companies, the dominant form of business, assuming a far more active role in advancing the sustainability movement. This is not to suggest that reforming section 172, or even the entire company law system, is the answer to climate change. It is most definitely not. However, it could be a ‘crucial piece of the jigsaw piece of sustainability’ that needs to be urgently put into place.85
[1] Laura Millan, ‘Climate Change linked to 5 Million Deaths a Year, New Study Shows’ (Bloomberg, 8 July 2021) <https://www.bloomberg.com/news/articles/2021-07-07/climate-change-linked-to-5-million-deaths-a-year-new-study-shows?in_source=embedded-checkout-banner#xj4y7vzkg> accessed 19 August 2023.
[2] Robert Booth and Geneva Abdul, ‘UK reaches hottest ever temperature as 40.2C recorded at Heathrow’ The Guardian (London, 19 July 2022).
[3] International Energy Agency, ‘CO2 Emissions in 2022’ (IEA Publications, March 2023) <https://iea.blob.core.windows.net/assets/3c8fa115-35c4-4474-b237-1b00424c8844/CO2Emissionsin2022.pdf> accessed 20 August 2023.
[4] Tess Riley, ‘Just 100 companies responsible for 71% of global emissions, study says’ (The Guardian, 10 July 2017) <https://www.theguardian.com/sustainable-business/2017/jul/10/100-fossil-fuel-companies-investors-responsible-71-global-emissions-cdp-study-climate-change> accessed 21 August 2023.
[5] Lisa Benjamin, ‘The Duty of Due Consideration in the Anthropocene: Climate Risk and English Directorial Duties’ [2017] Carbon & Climate Law Review 90, 93.
[6] Alpigray Lelik, ‘The Need for Amendment of Section 172 of the Companies Act 2006 due to Game Changer ESG: Double Enlightened Shareholder Value Approach for Sustainable and Purposeful Companies’ [2022] Social Science Research Network 1, 7.
[7] Explanatory notes to the Companies Act 2006, para 325.
[8] ClientEarth v Shell Plc [2023] EWHC 1897 (Ch).
[9] Companies Act 2006 (CA 2006) 3, s172.
[10] Shell (n 8).
[11] Wincham Shipbuilding Boiler & Salt Co (Hallmark’s Case) Re [1878] 9 Ch D 322, 328.
[12] Ibid.
[13] Andrew Keay, The Enlightened Shareholder Value Principle and Corporate Governance (1st edn, Taylor & Francis Group, 2012) 22.
[14] Robert Freeman, Strategic Management: A Stakeholder Approach (Pitman 2015) 5.
[15] Re Smith & Fawcett Ltd [1942] Ch 304.
[16] Re Smith (n 15) 2.
[17] CA 2006 (n 9) s172(1).
[18] HL Deb 11 January 2006, vol 447, column 244.
[19] Company Law Reform Bill, 11 July 2006, column 582.
[20] Good Jobs First, ‘Violation Tracker UK’ (Good Jobs First) <https://violationtrackeruk.goodjobsfirst.org/?advanced_mode=true%3E> accessed 22 August 2023.
[21] ibid.
[22] Taskin Iqbal and Andrew Keay ‘An Evaluation of Sustainability in Large British Companies’ (2019) 48 Common Law World Review 39, 63.
[23] Violation Tracker UK, ‘Advanced Search’, <https://violatointrackeruk.goodjobsfirst.org/?advanced_mode=true> accessed 21 August 2023
[24] Hao Liang and Renneboog Luc ‘On the Foundations of Corporate Social Responsibility’ (2017) 72 The Journal of Finance 2, 854.
[25] Carrie Bradshaw, ‘The environmental business case and unenlightened shareholder value’ (2013) 33(1) Legal Studies 141, 148.
[26] Keay (n 13) 129.
[27] Benjamin (n 5) 93.
[28] The Better Business Act Campaign, ‘About the Better Business Act’ <https://betterbusinessact.org/about/#theact> accessed 17 June 2022.
[29] Cobden Investments Ltd v RWM Langport Ltd [2013] EWHC 2810 (Ch).
[30] Andrew Keay, ‘Tackling the Issue of the Corporate Objective: An Analysis of the United Kingdom’s Enlightened Shareholder Value Approach’ (2007) 29 Sydney LR 577, 201.
[31] CA 2006 (n 9) s170(1).
[32] Misato Sato et al, ‘Impacts of climate litigation on firm value’ (2023) Grantham Research Institute on Climate Change and the Environment Working Paper No. 397 <https://www.lse.ac.uk/granthaminstitute/wp-content/uploads/2023/05/working-paper-397_-Sato-Gostlow-Higham-Setzer-Venmans.pdf> accessed 24 August 2023.
[33] Nicholas Grier, ‘Enlightened shareholder value: did directors deliver?’ [2014] JR 95, 100.
[34] Paul Davies, Sarah Worthington, and Chris Hare Gower’s Principles of Modern Company Law (11th edn, Sweet & Maxwell 2021) 277.
[35] Ngozi Okoye, ‘The BIS review and Section 172 of the Companies Act 2006: What Manner of Clarity is Needed?’ [2012] 33 Company Lawyer 15.
[36] Travers Smith, ‘Directors’ Duties and corporate purpose re-examined: should directors be obliged to prioritise people and the planet?’ (Travers Smith, 10 July 2023) <https://www.traverssmith.com/knowledge/knowledge-container/directors-duties-and-corporate-purpose-re-examined-should-directors-be-obliged-to-prioritise-people-and-planet/> accessed 18 August 2023.
[37] Reem Kabour, ‘What effect does the enlightened shareholder value principle in the Companies Act 2006 have on the corporate objective of UK companies?’ [2021] 8 SAS Open Journals 2, 29.
[38] _Shell (_n 8).
[39] Keay (n 13) 282.
[40] Jonathon Swil and Elise Edson, ‘Personal Liability of Directors for Climate Strategy: Landmark Case Against Energy Company Board’ (Shearman & Sterling, February 27 2023) <https://www.shearman.com/en/perspectives/2023/02/personal-liability-of-directors-for-climate-strategy–landmark-case-against-energy-company-board> accessed 17 August 2023.
[41] CA 2006 (n 9) s172.
[42] CA 2006 (n 9) s174.
[43] Shell (n 8) [7].
[44] Shell (n 8).
[45] CA 2006 (n 9) s261(2)a.
[46] Arad Reisberg, Derivative Actions and Corporate Governance (Oxford University Press, 2007), 165.
[47] CA 2006 (n 9) s267(2).
[48] Shell (n 8) [92].
[49] Shell (n 8) [89]-[92].
[50] Shell (n 8) [92].
[51] Shell (n 8) [93].
[52] Shell (n 8) [12].
[53] Law Commission Shareholder Remedies (Law Com CP No 142, 1996) para 4.6.
[54] Reisberg (n 51) 224.
[55] Shell (n 8) [30].
[56] Re Smith (n 15) [306] (Lord Greene M.R.).
[57] Umakanth Varottil, ‘ClientEarth-Shell: English Court Rejects Climate-Focused Sharheolder Derivative Suit’ (University of Oxford Faculty of Law Blogs, 1 June 2023) <https://blogs.law.ox.ac.uk/oblb/blog-post/2023/06/clientearth-shell-english-court-rejects-climate-focused-shareholder#:~:text=The%20fact%20that%20the%20Court,shareholders%20to%20demonstrate%20good%20faith> accessed 22 August 2023.
[58] Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821.
[59] ibid.
[60] Shell (n 8) [31].
[61] Shell (n 8) [22].
[62] Shell (n 8) [24].
[63] Shell (n 8) [66].
[64] Shell (n 8) [28].
[65] Shell (n 8) [33].
[66] Shell (n 8) [64].
[67] Re Smith (n 15).
[68] Andrew Keay, ‘Assessing and rethinking the statutory scheme for derivative actions under the Companies Act 2006,’ (2015) 16 Journal of Corporate Law Studies 1, 61.
[69] Simon Konstra, Sarah Crowther, and Laura Berry, ‘ClientEarth v Shell: A reality check for climate activist litigation?’ (DAC Beachcroft, 17 May 2023) <https://www.dacbeachcroft.com/en/articles/2023/may/clientearth-v-shell-a-reality-check-for-climate-activist-litigation/> accessed 20 August 2023.
[70] Varottil (n 57).
[71] Benjamin J Richardson, Fiduciary Law and Responsible Investing: In Nature’s Trust (Routledge 2015) 2.
[72] Graham Bradley, ‘Corporate Responsibility and Climate Change’ [2020] 73 Journal of International Affairs 155, 158.
[73] Sjafjell, Johnston, Anker-sorensen and Million, Shareholder primacy: the main barrier to sustainable companies, (Cambridge University Press, 2015) 79.
[74] The Shareholder Commons, ‘The Beta Stewart Proxy Review 2021’ (2021) 7.
[75] Better Business Act Campaign, ‘Coalition Members’ <https://betterbusinessact.org/supporters/> accessed 18 August 2023.
[76] Jeff Twentyman and George Murray, ‘A Bridge to Better Business: The positive case for updating director’s duties’ (Slaughter and May, 5 September 2022) <https://my.slaughterandmay.com/insights/briefings/a-bridge-to-better-business-the-positive-case-for-updating-directors-duties> accessed 21 August 2023.
[77] Better Business Act Campaign, ‘Frequently Asked Questions’ (Better Business Act) <https://betterbusinessact.org/frequently-asked-questions/> accessed 18 August 2023.
[78] Twentyman and Murray (n 76).
[79] Better Business Act Campaign, ‘The Act’ (Better Business Act, May 2023) <https://betterbusinessact.org/about/#theact> accessed 23 August 2023.
[80] Keay (n 68) 7.
[81] Companies Act 1993 (New Zealand) s 167(d).
[82] Companies Act 1993 s 166.
[83] Qamarul Jailani, ‘Derivative Claims under the Companies Act 2006: In Need of Reform?’ [2018] UCLJLJ 72, 87.
[84] Konstra, Crowther, and Berry (n 69).
[85] Sjafjell and others (n 73) 147.