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John & Orrick’s J.T. Ho recently recorded their latest monthly “Timely Takes” Podcast, and in it, J.T. highlights California’s recently adopted Assembly Bill 1305. This climate-related bill has gotten less attention than SB 253 and SB 261 — California’s two other climate bills approved in October — since it’s generally focused on the voluntary carbon markets and entities operating in California that market or sell voluntary carbon offsets. But, as detailed by this Orrick alert, it also “imposes various disclosure requirements on companies that make net zero, carbon neutrality, or similar claims, including through the use of voluntary carbon offsets.” “Claims” includes goals, and as we all know, that covers many companies whose businesses have nothing to do with the carbon markets!  And — get this — AB 1305 is effective on January 1, 2024. Yikes! That’s less than two short months from now.

The alert details what these covered companies need to disclose. Pay attention, since failures to comply can result in civil penalties, which accrue at a rate of up to $2,500 per day that information is not available or is inaccurate, for each violation, up to a maximum of $500,000.

If a company makes claims regarding the achievement of net zero emissions, carbon neutral claims or claims regarding reduction of greenhouse gas emissions:  Must publicly provide all information documenting how such a claim was determined to be accurate or actually accomplished, and how interim progress toward that goal is being measured, including:

– disclosure of independent third-party verification;
– identification of science-based targets; and
– disclosure of the relevant sector methodology.

This requirement only applies to companies that operate within or make claims within California.

If a company makes the claims described above and purchases or uses voluntary carbon offsets: In addition to the information described above, companies must publicly provide information regarding the applicable project and offsets, including:

– the offset registry or program;
– the offset project type;
– the specific protocol used; and
– whether there is independent third-party verification.

This requirement only applies to companies that operate within or purchase or use voluntary carbon offsets sold within California.

The podcast & alert detail some action items that covered companies need to add to their priority year-end to-do list to prepare for and draft this disclosure. When reviewing your goals for achievability and to confirm appropriate plans are in place, in addition to general greenwashing considerations and securities-related risk, J.T. recommends that companies consider the FTC’s Green Guides (including potential amendments) and state-level consumer protection & marketing laws.

– Meredith Ervine