The Growing Number of Investor Lawsuits Regarding Climate Risks

Despite the global movement towards green energy, oil industry leaders continue to invest heavily in unpopular projects and lie to shareholders regarding the risks of climate change to their businesses. This has led to a drastic increase in the number of shareholder lawsuits in recent years, as investors struggle to protect their investments. McDermott International’s Executive Vice President and Chief Operating Officer Samik Mukherjee, who tracks lawsuit news in the industry, has watched this development with interest and believes this marks the beginning of a great change for the oil and gas industry.

A study conducted by environmental think tank Carbon Tracker shows that oil and gas companies invested more than 50 billion dollars in 2017 in projects that were known to not align with the Paris Agreement. The 2015 international treaty’s aim is to reduce global greenhouse gas emissions and limit the global temperature increase to 2 degrees Celsius above preindustrial levels by asking all major emitting countries to cut their climate pollution and pursue greener energy solutions. The Carbon Tracker study showed that these oil and gas company investments are ill-advised given the global push towards clean energy and are likely to result in weak returns and massive investor losses.

As a result, shareholder lawsuits have begun in earnest. Today, the most prominent suits involve multiple shareholders accusing American oil giants of lying to the public regarding the risks of climate change to business growth and grossly misleading its investors. These lawsuits mark a new wave of investigating oil companies’ project inconsistencies with the current low-carbon economic push. These lawsuits are expected to grow, as many industry experts have estimated that international oil companies have invested at least 30 percent of their capital investment in projects that were incompatible with the Paris Agreement.

As petroleum supply greatly outstrips demand, high-cost projects that rely on increasing prices run the risk of becoming reserves with little value. For this reason, investors have joined forces with the Climate Action 100+ coalition and are demanding companies disclose their climate risks and ensure shareholders that their investments will align with the Paris Agreement.

Samik Mukherjee
Official blog of Samik Mukherjee