California Bill Mandates Corporate Emissions Disclosures
February 6, 2023
On January, 30, California lawmakers introduced a bill that would require large U.S. companies to disclose their greenhouse gas emissions, potentially affecting several thousand major companies.
What is covered: Politico reports the "California Climate Corporate Data Accountability Act" would require all companies earning at least $1 billion in revenue and doing business in California to provide information on their global carbon footprints starting in 2026.
Covered companies would be required to disclose:
- Scope 1 (direct operations);
- Scope 2 (energy use); and
- Scope 3 (upstream and downstream emissions).
The bill would be more stringent than the Securities and Exchange Commission, (SEC) proposed climate disclosure rule, which would only apply to publicly traded companies and would not require all of them to disclose Scope 3 emissions.
Could this be precedent: Politico reports that climate advocates believe this move could be replicated in other states. New York lawmakers are also proposing similar legislation this year, after failing last year.
Likelihood of passage: While a similar effort failed in the California Assembly last year after passing in the Senate, the bill’s sponsor remains optimistic, citing “stronger business support earlier in the process and some legislative districts flipping in November's election.”
But at the Federal level: As reported by the Wall Street Journal and Politico, the SEC may be considering softening elements of its proposed climate disclosure proposal, including Scope 3 emissions disclosure requirements and disclosing the impact of climate events on financial statements. In our comment letter, CREFC noted our members’ significant concerns related to and questions about these proposed requirements.
The SEC continues to receive significant pushback from lawmakers and companies, and given the likelihood of a barrage of litigation, the regulator may try to make the final rule as bulletproof as possible.
CREFC continues to monitor and respond to proposed ESG-related regulation and legislation. Please contact Sairah Burki (email@example.com) with questions or to join our Sustainability Initiative.
Managing Director, Regulatory Affairs
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