ESG INTEL
...On California Climate Change Disclosure Rules
Written by Leslie Wong and Hussein Sayani
On October 7, 2023, California Governor Gavin Newsom signed legislation requiring high-revenue companies (more than $1 billion per year) doing business in California to publicly report their annual scope 1, 2, and 3 greenhouse gas (GHG) emissions by 2026. The legislation, known as the Climate Corporate Data Accountability Act (SB 253), requires subject companies to report GHG emissions in accordance with the GHG Protocol and requires increasing levels of data assurance through 2030.
In addition, Governor Newsom signed the Climate-Related Financial Risk Rule (Senate Bill [SB] 261) on the same day. SB 261 requires companies doing business in California and making at least $500 million per year in revenue—excluding insurance companies—to publicly report their climate-related financial risks and the measures they are taking to reduce or adapt to those risks every two years, starting in 2026. The companies that report this information must follow the International Financial Reporting Standards’ Sustainability Disclosure Standards.
Governor Newsom also signed GHG-related legislation affecting companies regardless of revenue. The Voluntary Carbon Market Disclosures Business Regulation Act (Assembly Bill [AB] 1305) targets the voluntary carbon offset market, including any company doing business in California that sells/markets carbon offsets, purchases/uses carbon offsets, and/or publicly claims to have achieved net-zero emissions, carbon neutral status, or significant carbon emissions reductions. Each company must publicly disclose information relate to the offsets offered for sale, purchased, or used, as well as any emissions reduction/net-zero claim details on its website, as applicable. Unlike the other two actions, AB 1305 is already in effect as of January 1, 2024.
The California Air Resources Board (CARB) is planning to implement regulations for these rules with a broad interpretation of “doing business in California.” Penalties may include up to $500,000 per year for failing to report GHG emissions under SB 253, up to $50,000 per year for failing to report climate risks, and up to $2,500 per day for failing to report carbon offset generation and reduction claims.
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Leslie Wong
Senior Associate
lwong@langan.com
Hussein Sayani
Senior Project Manager
hsayani@langan.com
