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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 8 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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Recently, the California Legislature passed two bills relating to climate risk and emissions disclosures that could impact thousands of companies doing business in California. The Climate-Related Financial Risk Act would require companies to report biennially on climate-related financial risk, and the Climate Corporate Data Accountability Act would require companies to publicly disclose their scope 1, 2 and 3 greenhouse gas emissions.

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Corporate Climate Data Accountability Act (SB 253) – Scope 1, 2 and 3 Greenhouse Gas Emissions

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The <a href="https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB253">Corporate Climate Data Accountability Act (SB 253)</a> would apply to U.S. companies – whether public or private – with annual total revenues in excess of $1,000,000,000 that “do business” in California. The revenue threshold is based on the company’s revenue for the prior fiscal year.

SB 253 would require the state board to develop and adopt regulations, on or before January 1, 2025, to require reporting companies to annually disclose their scope 1, 2 and 3 emissions.

The regulations would require companies to comply with the following disclosure timeline:

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Beginning in 2026, companies would be required to:

Administrative Requirements

Under SB 253, companies would be required to comply with the following:

Under SB 253, the state board would be authorized to sanction any company that fails to file, files late, or fails to meet the disclosure requirements by imposing a fee, not to exceed $500,000 in a reporting year. The state board would be permitted to consider certain mitigating factors, such as the company’s past and present compliance with the disclosure requirements and whether the company took good faith measures to comply with the requirements.

Climate-Related Financial Risk Act (SB 261)

The <a href="https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB261">Climate-Related Financial Risk Act (SB 261)</a> would apply to U.S. companies – whether public or private – with annual total revenues in excess of $500,000,000 that “do business” in California. The revenue threshold is based on the company’s revenue for the prior fiscal year. Companies that are subject to regulation by the California Department of Insurance or are in the insurance business in another state are not covered.

SB 261 would require companies to prepare a climate-related financial risk report biennially, beginning on or before January 1, 2026.

Under SB 261, companies would be required to disclose the following in a climate-related financial risk report:

Under SB 261, companies would be required to comply with the following:

If a company does not complete a report with the required disclosures, the company would provide the recommended disclosures to the best of its abilities, including a detailed explanation for any gaps and a description of how the company plans to prepare the disclosures going forward.

Under SB 261, the state board would be authorized to sanction any company that fails to publish the report on the company’s website by imposing a fee, not to exceed $50,000 in a reporting year. The state board would be permitted to consider certain mitigating factors, such as the company’s past and present compliance with the disclosure requirements and whether the company took good faith measures to comply with the requirements.

Both the Climate-Related Financial Risk Act and the Climate Corporate Data Accountability Act recently passed the California State Legislature and are headed to Governor Gavin Newsom’s desk. Governor Newsom has until <a href="https://www.assembly.ca.gov/schedules-publications/legislative-deadlines">October 14, 2023</a> to sign, veto, or let the bills pass into law without signing. Companies should begin preparing for these bills to become law.

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

https://admin.thompsonhine.com/wp-content/uploads/2023/09/Preparing-for-New-California-Climate-Risk-and-Emissions-Disclosure-Laws.pdf

Preparing for New California Climate Risk and Emissions Disclosure Laws

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