Is California going to set the gold standard on climate disclosure?
Here’s the intro from this blog by Cydney Posner:
Are you fretting about when (or if) the SEC is going to take action on its climate disclosure proposal and what exactly the SEC has in store for public companies in its final regulations? Consider this: California might just beat the SEC to the punch. You might remember that, in 2021, a California State Senator introduced the Climate Corporate Accountability Act, which failed last year after sailing through one chamber of the legislature but coming up one vote shy in the second (see this PubCo post). But that bill was re-introduced this year as the Climate Corporate Data Accountability Act (SB 253) and packaged with other bills, notably SB 261, Greenhouse gases: climate-related financial risk, into California’s Climate Accountability Package, a “suite of bills,” according to the press release, “that work together to improve transparency, standardize disclosures, align public investments with climate goals, and raise the bar on corporate action to address the climate crisis.
At a time when rising anti-science sentiment is driving strong pushback against responsible business practices like risk disclosure and ESG investing,” the press release continued, “these bills leverage the power of California’s market to continue the state’s long tradition of setting the gold standard on environmental protection for the nation and the world.” (See this PubCo post.) If signed into law this time, SB 253 would mandate disclosure of GHG emissions data—Scopes 1, 2 and 3—by all U.S. business entities with total annual revenues in excess of a billion dollars that “do business in California.” SB 261, with a lower reporting threshold of $500 million, would require subject companies to prepare reports disclosing their climate-related financial risk, in accordance with TCFD framework, and describe their measures adopted to reduce and adapt to that risk.
If signed into law, according to Bloomberg, SB 253 would apply to over 5,300 companies and SB 261 would apply to over 10,000 companies. But, given their history, what makes anyone think these bills will be signed into law this time? As Politico observes, “[w]hen do you know a bill might have legs? When there’s a bit of horse-trading going on.” And that’s apparently just what’s been happening recently with these bills.