The UN versus Big Oil

Karolin SchapsTuesday 21 May 2024

A letter from UN-appointed independent human rights experts to oil giant Saudi Aramco and its financiers has attracted intense interest. Global Insight assesses what the increasing legal pressure on companies means in the context of the climate crisis and human rights.

As the world faces devastating manifestations of the climate crisis – including heatwaves, storms and floods – the legal community is increasingly connecting the effects of the climate crisis with human rights. Against this backdrop, there’s greater scrutiny of the obligations of companies under the UN Guiding Principles on Business and Human Rights (the UNGPs), while cases of climate litigation – in which plaintiffs seek to hold governments and companies to account for the impact of the climate crisis, including on human rights – are rising in frequency.

A galvanising force here is a letter sent by a group of independent human rights experts, appointed and mandated by the UN Human Rights Council, to oil giant Saudi Aramco and its financiers, made public in August 2023. The letter has attracted intense interest from legal professionals across multiple spheres. For the first time ever, UN-appointed independent experts have clearly linked the human rights obligations states and state entities have under the 1976 International Covenant on Civil and Political Rights (ICCPR) to protecting citizens against the harmful effects of the climate crisis.

‘It’s a flashing-colours endorsement of what’s in the ICCPR. That means to me that citizens can go to courts in their own countries to try and get the obligations of states, and private companies too, enforced’, says David Estrin, Co-Chair of the IBA Presidential Task Force on Climate Change Justice and Human Rights and Adjunct Professor and Academic Co-Director at Osgoode Hall Law School in Toronto.

'The Paris Agreement comes first'

The letter was sent by experts from the UN Working Group on the issue of human rights and transnational corporations and other business enterprises, as well as four UN special rapporteurs. In it, the UN-appointed experts urge the Saudi Arabian national oil company to clarify what it’s doing to abide by human rights laws related to the climate crisis despite its pursuit of fossil fuel exploration and production in order to maintain its world-leading position as a crude oil producer.

‘We would like to express our most serious concern regarding the adverse impacts on human rights caused by activities such as the exploitation of fossil fuels which contribute to climate change’, write the UN-appointed experts. They further highlight that the continued expansion of oil and gas exploration and production has a negative impact on the enjoyment of the human right to a clean, healthy and sustainable environment. This right was added to the library of internationally recognised human rights in 2022 after the adoption of a resolution on the matter by the UN General Assembly.

The UN-appointed experts specifically mention Saudi Aramco’s obligations under the UNGPs, which were adopted by the Human Rights Council in 2011. These include the principle that enterprises should avoid infringing human rights and address adverse human rights impacts in which they are involved.

It’s also noteworthy that the experts refer to state-owned Saudi Aramco’s obligations under the Paris Agreement – the legally binding international treaty on climate change adopted in 2015. ‘This letter clarified for the first time that state-owned enterprises have an increased responsibility to act in line with international standards under the Paris Agreement’, says Lara Douvartzidis, Special Projects Officer for the IBA Business Human Rights Committee and an Australian-qualified solicitor. ‘It confirms that these obligations exist over and beyond compliance with applicable laws, such as domestic laws regulating companies’ environmental impacts. That is really fundamental because, although states draft their own domestic laws, this says “the Paris Agreement comes first” and that’s huge.’

Saudi Aramco didn’t respond to Global Insight’s request for comment and its response to the UN’s letter hasn’t been made public. On its website, the company says it supports ‘the aims of the Paris Agreement to limit the global average temperature increase to well below 2°C above pre-industrial levels’ and that its ambition ‘is to achieve net-zero Scope 1 and Scope 2 greenhouse gas [GHG] emissions across our wholly owned and operated assets by 2050’. It highlights that its emissions reporting ‘is consistent with the Greenhouse Gas Protocol guidelines, and is based on the World Resources Institute and World Business Council for Sustainable Development GHG Protocol guidelines’. It also mentions research it’s undertaking to further reduce emissions in its upstream, refinery and chemicals operations, and end-use applications.

Why Saudi Aramco?

Next to being unique in linking human rights obligations to protection from the impact of the climate crisis, the letter also caught the attention of the legal world for singling out Saudi Aramco. The explanation for this lies in the start of the two-year long procedure that preceded the publication of the letter. In 2021, environmental law organisation ClientEarth filed a complaint against Saudi Aramco under the UN’s Special Procedures complaints process, which issues non-judicial communications to governments, businesses or organisations on allegations of human rights violations.

Alatoi Ishmael Kalsakau, former Prime Minister of Vanuatu, speaking at UN Headquarters, New York, US, 29 March, 2023. REUTERS/Eduardo Munoz

ClientEarth explains that it targeted Saudi Aramco because the oil company was the world’s single-largest corporate emitter of GHGs, with more than four per cent of all historic carbon emissions since 1965 attributable to the enterprise, which is almost entirely owned by the Saudi Arabian government. ‘Aramco’s failure to address its contribution to climate change in line with international human rights law comprises the largest climate-linked breach of human rights law by a business’, claims ClientEarth.

Its human rights breaches were especially striking, the organisation argues, because the exposure of the people of Saudi Arabia to the threats of the climate crisis is disproportionately high. The arid country has recently seen record heat extremes with temperatures above 50 degrees Celsius and further stress from carbon emissions would render the Gulf region almost uninhabitable under brutally hot and dry weather conditions, according to ClientEarth.

Separately, the Intergovernmental Panel on Climate Change found that Saudi Arabia was prone to increased desertification if temperatures continue to climb, growing the intensity of hazardous dust storms that adversely impact human health and damage infrastructure. Drought and desertification would also worsen people’s access to fresh drinking water, limiting another crucial human right, according to the UN body for assessing the science related to the climate crisis.

Saudi Aramco’s state ownership – as high as 98.5 per cent – also magnifies its responsibilities towards its compatriots, even though the UNGPs apply to all enterprises equally. ‘State-owned enterprises should have an increased responsibility to act fully in line with international standards and best practices to prevent and mitigate against the human rights impacts of climate change’, say the UN-appointed experts in their letter to the oil company. Having ratified the Paris Agreement in 2016, Saudi Arabia’s government is obliged to significantly reduce its GHG emissions in order to keep global temperatures from rising above 1.5 degrees Celsius.

‘There are concerns that the ongoing business activities of Saudi Aramco undermine the ability of the Kingdom of Saudi Arabia to discharge its duties under international law and commitments in the context of the Paris Agreement’, the UN-appointed experts say, adding that they’re concerned about Saudi Aramco’s divergence from the path of reaching international climate goals.

ClientEarth also explains its choice for singling out Saudi Aramco in alleging that the company’s ‘greenwashing’ practices – the act of distributing information about carbon-reduction practices that in fact disguise climate inaction – are undermining human rights and preventing citizens from carrying out meaningful measures to limit carbon emissions.

For example, Saudi Aramco claims to have low carbon-intensity crude oil production, but the UN-appointed experts highlight allegations that the company’s calculations omit Scope 3 emissions – carbon emitted by customers using Saudi Aramco’s products – which make up the vast majority of the oil company’s emissions. ‘Saudi Aramco’s failure to accurately measure and report its indirect emissions could result in an underestimation of its contribution to climate change, which could in turn exacerbate the negative impacts of climate change on human rights’, the letter reads.

Banks under the spotlight

The UN letter also attracted interest as it named 12 of Saudi Aramco’s financial backers, a list which included a number of global banks. In their complaint, ClientEarth explains its choice to include the oil company’s financial backers in arguing that these enterprises are equally tied to protecting human rights under the UNGPs. ‘ClientEarth’s complaint argued that those helping Aramco access financing through its IPO [initial public offering], bond issuances, loans and other transactions should have identified and acted on Aramco’s human rights impacts – either influencing the company to align itself with the Paris goal, or considering cutting ties completely if they don’t have the leverage over Aramco to do so’, ClientEarth explains.

Donald Pols, Director of Milieudefensie (Friends of the Earth), holds a copy of the verdict in a case against Shell demanding a reduction in fossil fuel reliance. The Hague, Netherlands, 26 May 2021. REUTERS/Piroschka van de Wouw

According to the information the UN-appointed experts received, in recent years, Saudi Aramco has increasingly tapped private financial resources to raise money for its business activities. These financial institutions have lent money to the oil giant, purchased its bonds or equities, facilitated or advised Saudi Aramco on financial transactions or invested directly in the company’s oil and gas infrastructure. Further, by financially supporting Saudi Aramco’s business strategy, these institutions have been contributing to climate crisis-related human rights impacts.

Since the UN’s communication to Saudi Aramco, ClientEarth has also written to the leadership of the banks mentioned in the letter, referring to the warnings made by the UN-appointed experts and translating them ‘into actionable red lines banks need to incorporate into their business practices and financing policies’.

Following receipt of the letter from the UN-appointed experts, the companies alleged to be involved had 60 days to submit their replies to the UN committee. Some of these have been made public. None of the financial institutions make specific reference to Saudi Aramco, citing confidentiality, but all state their intended plans to lower their exposure to carbon emissions in their investments. Each bank also mentioned their membership of the UN-convened Net-Zero Banking Alliance, which was set up in 2021 and aims to help financial institutions achieve credible targets for reducing carbon emissions within their investment portfolios by 2030.

‘Many of our customers operate in the high-emitting sectors and regions that face the greatest challenge in reducing emissions. They are looking for support in moving towards a net-zero future. This means we can have a significant impact in helping reduce emissions by working with these customers’, said HSBC in its response to the committee. The global bank aims to hit net-zero emissions in its own operations and supply chain by 2030 and wants to align its financed emissions with net zero by 2050.

Japanese bank SMBC says it won’t conduct any new transactions with customers found to have committed human rights violations and it will take a ‘cautious stance’ on customers with existing financing transactions. ‘If no remediation or improvement is observed, we will reduce our credit exposure’, the bank says in its response to the UN group.

The UN’s letter comes at a time when many financial institutions have been vocal about their plans to limit investments in carbon-intensive targets. Banks are also increasingly exposed to environmental, social and governance (ESG) risks, which include calculations on carbon emissions in their investment portfolios and on which they’re being assessed. ‘By referring to the possible responsibility of Aramco’s financial backers, the communication has the potential to lead to increased scrutiny and pressure on financial institutions and investors who support environmentally unfriendly companies’, says Baroness Helena Kennedy KC, Director of the IBA’s Human Rights Institute (IBAHRI).

Growing legal pressure

The letter from the UN-appointed experts comes at a time of greater legal scrutiny for governments, organisations and enterprises, who are under pressure to act more definitively on helping to stem the worsening effects of the climate crisis in the interest of protecting human rights. The UN’s Global Climate Litigation Report: 2023 Status Review found that globally there were 2,180 climate-related cases filed in 2022, a 40 per cent increase on 2020 and nearly three times as many as in 2017. ‘Access to justice enables the protection of environmental law and human rights and promotes accountability in public institutions’, the report says.

Overall, the legal toolbox available for holding governments and corporations to account on climate action continues to grow. In August 2023, a group of young plaintiffs won a court victory against the US state of Montana in a case in which they claimed that the state had violated their right to a clean and healthful environment by allowing fossil fuel development that’s harmful to the climate. ‘Montana’s [GHG] emissions and climate change have been proven to be a substantial factor in causing climate impacts to Montana’s environment and harm and injury to the Youth Plaintiffs’, ruled the Montana First Judicial District Court of Lewis and Clark County. The case is now heading to Montana’s Supreme Court, with the state’s argument being that even if it stopped allowing carbon dioxide emissions, this wouldn’t have any meaningful impact on the climate crisis in general.

In 2021, a group of 58,000 Belgian citizens won a case arguing that the country’s emissions reduction targets needed to be more ambitious in order to meet international climate goals. The Brussels Court of First Instance ruled that the Belgian government had breached its duty of care by not preventing the harmful effects of the climate crisis. In November 2023, the Court of Appeal of Brussels confirmed the lower court’s findings – making an exception for Belgium’s Walloon Region, one of the defendants, on the basis that the authorities there were already taking sufficient action – and additionally ordered the remaining defendants to reduce their emissions.

An Aramco tank is seen at Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia, 21 May, 2018 REUTERS/Ahmed Jadallah

Also in 2021, the Hague District Court ruled in favour of Dutch environmental group Milieudefensie’s claim that domestic oil giant Shell was violating its duty of care under Dutch law and human rights obligations by contributing to the harmful effects of the climate crisis. The company was forced to commit to an increase to 45 per cent of its carbon emissions reductions by 2030, relative to 2019 levels across its own and end-users’ emissions (Scope 1, 2 and 3). ‘The CO2 emissions of the Shell group, its suppliers and customers are greater than those of many countries. This contributes to global warming, which leads to dangerous climate change and poses serious risks to human rights, such as the right to life and an undisturbed family life. It is generally accepted that companies must respect human rights’, the Dutch Court explained in its ruling.

In April, Milieudefensie faced Shell again in a Dutch appeals court, with the former accusing the latter of failing to take action after the initial judgment. Shell said in 2021 that it was ‘investing billions of dollars in low-carbon energy’ and denies it has since ignored the Hague District Court’s ruling. Shell’s chief executive, Frans Everts, has stated that ‘we too find that urgent action is needed to stop climate change […] but this court case is not the way to achieve that aim’.

Climate action is also subject to great scrutiny at the highest judicial level globally. In March, the UN’s General Assembly passed a resolution requesting the International Court of Justice (ICJ) to issue an advisory opinion on the obligations of states in respect of the climate crisis. The Court’s advisory opinions aren’t legally binding, but they’re highly regarded in giving a steer on legal and moral authority. Following an extensive period assembling information on the subject, the ICJ is expected to issue its opinion in 2024. ‘States may include a reference to the [UN] letter in their submissions to the ICJ. The Court will no doubt be assisted by what these experts have said’, says Douvartzidis.

Everything is interconnected

The need to fuse the climate crisis and human rights in legislation is of critical importance as threats intensify. Wildfires, floods, droughts and shrinking biodiversity are symptoms of a warming climate and putting ever more people at risk. The climate crisis is a direct threat to human rights around the world. As conflicts grow around climate-related issues, the unshakeable foundation of human rights, which are non-erodible even in wartime, is an important constant that will probably guide more and more legal decisions in climate cases going forward.

‘It is clear how closely interconnected climate change and human rights are. We are already witnessing the severe consequences that the adverse effects of climate change – such as extreme weather events, rising sea levels, and food scarcity – have on people's rights to life, health, food and shelter. And all of this is only going to dramatically worsen going ahead’, says the IBAHRI’s Baroness Kennedy KC.

The island state of Vanuatu, an archipelago of over 80 islands in the South Pacific that will be largely uninhabitable if global temperatures rise by at least three degrees Celsius, led a coalition of 132 nations in helping to gain adoption of the resolution requesting the ICJ to issue an advisory opinion at the UN General Assembly in spring 2023. ‘The countries hit the hardest are often those contributing the least to global greenhouse gas emissions. Sadly, catastrophic and compounding impacts of climate change are growing in number around the world’, says Alatoi Ishmael Kalsakau, the former Prime Minister of The Republic of Vanuatu.

The issue of compensation to nations disproportionately exposed to the consequences of the climate crisis in comparison to their GHG emissions loomed large at the COP28 UN Climate Change Conference in Dubai in late 2023. During the conference, countries established the Loss and Damage Fund, which was seeded with $100m each from COP28 host the UAE and from Germany. This followed agreement on the Fund at the COP27 conference in Egypt’s Sharm El Sheikh, recognising the direct link between climate crisis-driven threats such as drought and fundamental human rights. ‘Vulnerable and marginalised communities are the most affected by climate change. This includes Indigenous peoples, low-income populations, and those living in climate-sensitive regions. Only through a holistic approach to the matter [can] the rights of the most vulnerable be protected and affected individuals and communities be provided with adequate remedies’, says Baroness Kennedy KC.

The letter from the UN-appointed experts sets out how lawyers could interpret the obligations of companies regarding protection of human rights relating to the climate crisis under the UNGPs. Although non-judicial, it can contribute to the cases of those seeking to hold large carbon emitters accountable in courts.

‘[The UN letter] is almost like a first pancake in what I’m sure will be a stack one day that helps us understand how the UNGPs relate to climate and what steps companies and financial institutions should take to ensure that rights holders are protected and respected’, says Douvartzidis.

The UN predicts in its 2023 Global Climate Litigation Report that the number of cases relying on human rights enshrined in international law and national constitutions to evoke climate action will continue to increase. As part of this, growing numbers will be brought by marginalised groups, such as women and young people who experience the effects of the climate crisis particularly acutely. ‘It will just take the right group of people to get their heads around it and use this and I think they’ll probably be able to wave a very big flag that should get the attention of both domestic governments and big emitters’, says Estrin.

Karolin Schaps is a freelance journalist and can be contacted at karolin.schaps@magentamedia.eu