(Reuters) — A group of European institutional investors is backing a novel London lawsuit against energy giant Shell’s board over alleged climate mismanagement in a case that could have far-reaching implications for how companies tackle emissions.

ClientEarth, an environmental law charity turned activist Shell investor, said it had filed a High Court claim Wednesday, alleging Shell's 11 directors have failed to manage the “material and foreseeable” risks posed to the company by climate change — and that they are breaking company law.

It is the first notable lawsuit by a shareholder against a board over the alleged failure to properly prepare for a shift away from fossil fuels — and comes one week after Shell posted a record $40 billion profit for 2022, partly fueled by the energy crunch after Russia's invasion of Ukraine.

Shell rejected the allegations, saying its climate targets were ambitious and on track and that its directors complied with their legal duties and acted in the company's best interests.

“ClientEarth's attempt ... to overturn the board's policy as approved by our shareholders has no merit,” a spokesperson said.

Shell has ramped up spending on renewable energy and low-carbon technologies.

But British pension funds London CIV and Nest, Swedish pension fund AP3, French asset manager Sanso IS, Degroof Petercam Asset Management in Belgium and Denmark's Danske Bank Asset Management and Danica Pension and AP Pension are among those to have written letters supporting the claim.

The investor group has around 450 billion pounds ($543 billion) in assets under management collectively and owns about 12 million of Shell's 7 billion shares.

London CIV said its Shell stake was a “primary hotspot of risk and exposure within our portfolio.”

“We hope the whole energy industry sits up and takes notice,” said Mark Fawcett, Nest's chief investment officer.

If judges allow the so-called derivative action to proceed, it could encourage investors in other companies, including in those funding carbon emitters, to litigate against boards that fail to adequately manage climate-related risks, experts say.

Some banks are reducing their funding of fossil fuel companies.

The case comes two years after Shell was ordered to slash carbon emissions in a landmark Dutch climate case.

Shell, which is appealing, plans to reduce the carbon intensity of its products — which measures greenhouse gas emissions per unit of energy produced — by 20% by 2030, 45% by 2035, and by 100% by 2050 from 2016 levels.