City-headquartered law firm Mishcon de Reya has launched an investigation into a potential group legal action against energy company Drax Group over allegations of greenwashing.
The law firm is looking into taking a legal challenge under the Financial Services and Markets Act 2000 against the energy company over alleged false environmental claims, which it said, have “affected share values”.
Mishcon is acting on behalf of a group shareholder to look into whether it can take out a legal action against the energy company. Currently, there has been no claim filed to the courts.
It is stated by the firm that shareholders have seen “significant share price drops” resulting from Drax’s recent negative media and regulatory attention.
The firm has partners Richard Leedham, Andrew Short and associate Tiffany Morgan on the investigation.
Commenting on it, Leedham 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,” he added.
Drax operates the UK’s largest power station, with four biomass terminals, which make up 12 per cent of the country’s renewable mix. Its biomass plant is the single largest CO2 emitting power plant in the UK, responsible for 12.1 metric tonnes of CO2 according to climate analyst Ember.
Despite the run of bad public relations, it reported a bumper set of 2023 results on Thursday, as its adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) jumped 66 per cent to £1.2bn, while total gross profit rose 91 per cent from £1bn to £1.9bn.
Commenting on Mishcon’s investigation, a Drax spokesperson said: “Credible leading authorities, including the UN’s IPCC and the UK’s Climate Change Committee are clear that biomass has an important role to play in delivering climate goals, including facilitating the deployment of the carbon removals technology bioenergy with carbon capture and storage (BECCS).”
“Drax Power Station is the UK’s largest power station and through transforming the plant to use sustainable biomass instead of coal, its fossil scope one and two carbon emissions have been reduced by approximately 99 per cent since 2012.”
“The power station plays a critical role in UK energy security, generating 4 per cent of our electricity and 8 per cent of our renewable power, and when it is converted to BECCS operations it will be able to deliver a significant proportion of the country’s carbon removal targets,” they added.
This news comes after a new report highlighted that nearly two-thirds of UK business leaders are concerned that their ESG targets will put them at risk of litigation.