October 11, 2023

California Climate Disclosure Bills Are Now Law

If you attended our 2023 Practical ESG Conference or our 2023 Proxy Disclosure & 20th Annual Executive Compensation Conferences, you heard about two bills passed by California’s legislature in September that together comprise the state’s “Climate Accountability Package.”  Here’s an important update that Lawrence shared yesterday with our Practical ESG blog subscribers:

This past Saturday, California Governor Gavin Newsom signed two sweeping climate disclosure bills into law as had been expected: SB253 – the Climate Corporate Data Accountability Act (see a summary here) and SB261 – Greenhouse gases: climate-related financial risk (see a summary here).

In almost identical letters to the state Senate announcing his action on SB253 and SB261, Newsom indicated that he has two significant concerns with the new law:

“… the implementation deadlines in this bill are likely infeasible, and the reporting protocol specified could result in inconsistent reporting across businesses subject to the measure. [Ed. note: Newsom’s comment about the reporting protocol was omitted in the letter on SB261]

Additionally, I am concerned about the overall financial impact of this bill on businesses, so I am instructing CARB [California Air Resources Board] to closely monitor the cost impact as it implements this new bill and to make recommendations to streamline the program.”

SB253 requires regulations to be developed and implemented by CARB, while SB261 is self-implementing with the first report due January 1, 2026. The concerns expressed by Newsom will likely be part of any legal challenge against the new laws. A lawsuit would also impact potential timing of the requirements as courts stay challenged language in situations like this until the suit(s) is/are resolved. The new laws could have an impact on the SEC’s climate disclosure as SEC Chair Gary Gensler hinted at two weeks ago. It’s going to be interesting to see how all the moving parts play out. We’re definitely tracking this from the legal, accounting, assurance and technical perspectives for you.

Here on, we’re posting resources in our “Climate Change” Practice Area.

– Meredith Ervine