- Mishcon de Reya is investigating a group shareholder action against energy company Drax Group Plc (Drax), claiming compensation for shareholders over alleged false environmental claims by Drax that have adversely affected share values.
- The legal challenge under section 90A and schedule 10A of the Financial Services and Markets Act 2000 focuses on Drax's misleading portrayal of its sustainability practices and the environmental benefits of its biomass energy.
- Such claims by Drax have led to inflated share values, now jeopardised by compelling opposing evidence which indicates that biomass burning may be more harmful to the environment than fossil fuels.
- Shareholders have seen significant share price drops resulting from Drax's negative media and regulatory attention – most recently in a report published by BBC Panorama – exposing Drax's greenwashing of its green credentials as to its biomass energy production.
- Losses to Drax's shareholders are based on these sizable share price drops from 2021 to date.
For many years, Drax has claimed that woody biomass (pellets made from residue wood including sawdust, forestry or agricultural residues and roundwood) energy is unequivocally low carbon or carbon neutral and capable of enabling Drax to produce negative emissions by 2030. Drax also states that the wood used in its biomass pellets is derived from wholly sustainable sources. This business model has enabled Drax to benefit from a total of c. £6.5bn in renewable energy subsidies from the UK Government.
Drax's environmental claims are contradicted by a considerable body of scientific evidence which concludes that biomass burning emits more CO2 than coal or other fossil fuels. Drax is in fact the single largest emitter of CO2 in the UK, which was admitted by Drax's CEO in oral evidence to the UK Government. Investigations into Drax have also revealed that Drax obtains the wood for its biomass pellets from whole logs harvested from primary old-growth forests in Canada.
As a result, a swathe of negative media reports calling Drax's green credentials into question have triggered sizeable drops in Drax's share price from 2021 to date.
Richard Leedham, Partner at Mishcon de Reya, said:
"There are many ways in which companies who masquerade as "green" ought to be called to account. In this case, Drax's misleading statements and omissions appear to have caused actual loss to its own shareholders. We are committed to ensuring transparency and honesty in environmental reporting and are looking to hear from anyone who held shares from January 2021 to discuss how we would run and fund a group claim. This is not only about seeking financial redress but also about upholding integrity in sustainable investing."
If you are a Drax shareholder – institutional, retail, or via a managed fund – and are interested in pursuing the claim, or would like further information on the claim at this stage, please email: draxclaim@mishcon.com.
The information in this article is based on our current understanding according to available information. This article is for informational purposes only and does not amount to legal advice.
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