California Legislative Update

October 10, 2023

The following overview of new laws enacted in California is likely to be of interest to GBI’s community.

As the U.S. awaits finalization of the Security Exchange Commission’s proposed climate disclosure rules, elected official in California have taken matters into their own hands. On October 7, Governor Newsom of California signed two bills into law that have direct financial and environmental implications for public and private organizations that conduct business in the state.

SB 253, the Climate Data Accountability Act, and SB 261, the Climate Related Risk Disclosure Act, target businesses who gross more than $500 million in gross revenue. The list of those impacted is over 7,000, however 81% of California-based companies reporting to CDP disclose inherent benefits from climate regulation. California has remained a priority market for GBI advocacy efforts, and as part of our 2024 strategic plan, will be the home of our Decarbonization and Sustainable Buildings seminar, as well as a plethora of other outreach activity.

Because these bills will impact many of our GBI community members, we have prepared an overview of both bills below.

1.       Senate Bill 253, the Climate Data Accountability Act

  • As the name suggests, the focus of the bill is data.
  • Applies to public and private businesses who conduct business in California with revenues greater than $1 billion.
  • Requires each company to report their emissions comprehensively, including scopes 1 and 2 in 2026 and Scope 3 in 2027. The bill stipulates that companies will have to submit emissions calculations to a digital reporting platform, and they must make disclosures easily comprehensible to residents, investors, and other stakeholders.
  • The California Air Resources Board (CARB) will oversee reporting and ensure verification of data by a registry or third-party auditor with expertise in carbon accounting. Companies that fail to comply with the new regulations could be subject to civil penalties from the state’s attorney general.

2.       Senate Bill 261, the Climate-Related Risk Disclosure Act

  • Applies to public and private businesses who conduct business in California with revenues greater than $500 million.
  • In the climate-related financial risk report, businesses would need to disclose their (i) climate-related financial risk, based on the recommendations of the Task Force on Climate-Related Financial Disclosures, and (ii) the measures adopted to mitigate and adapt to the disclosed climate-related financial risk.
  • The bill also addresses the financial risks businesses could face if they are unprepared for the transition toward a low-carbon economy. For instance, automobile manufacturers who fail to prepare for the shift towards electric vehicles will likely experience a decline in market share, resulting in revenue losses.

The initial round of climate risk disclosure reports will be due by January 1, 2026