What You Need To Know
- Governor Gavin Newsom is expected to sign Senate Bill 219, which will amend the Climate Corporate Data Accountability Act (Senate Bill 253) and the Climate-Related Financial Risk Act (Senate Bill 261).
- The amendments would not impact the timeline for the disclosure of Scopes 1 and 2 Greenhouse Gas (GHG) emissions under SB 253, beginning in 2026 but may slightly delay the timeline for disclosure of Scope 3 GHG emissions (although the first disclosure will continue to be due in 2027).
- The California Air Resources Board (CARB) would have until July 1, 2025 to adopt regulations for Scopes 1, 2, and 3 GHG emissions reporting.
- GHG emission reports would be allowed to be consolidated at the parent company level.
As we previously reported (see our alerts here and here), in October 2023, the California legislature adopted three significant climate disclosure laws:
- The Climate Corporate Data Accountability Act (SB 253) requires companies doing business in California with total annual revenues exceeding $1 billion to annually disclose their Scope 1 and 2 GHG emissions beginning in 2026 and Scope 3 GHG emissions beginning in 2027.
- The Climate-Related Financial Risk Act (SB 261) requires companies doing business in California with total annual revenues exceeding $500 million to biennially disclose climate-related financial risk and risk mitigation measures, with the first disclosures due on or before January 1, 2026.
- The Voluntary Carbon Market Disclosures Act (Assembly Bill 1305) requires companies that make net-zero, carbon neutrality, or similar claims, including through the use of voluntary carbon offsets, to make certain disclosures on their website. The deadline for these disclosures was initially proposed to be January 1, 2024, then later clarified by the Bill’s sponsor to be January 1, 2025.
Although Governor Newsom expressed concerns regarding the implementation deadlines and financial impacts of SB 253 and SB 261, he signed all three bills into law in October 2023.
Perhaps not surprisingly, given his prior reservations and the rapidly approaching implementation deadline for SB 253 by CARB, Governor Newsom proposed delays to the implementation of SB 253 and SB 261. His proposed amendments would have delayed reporting of Scope 1 and 2 GHG emissions until 2028 and Scope 3 GHG emissions until 2029 and would have delayed climate-related financial risk disclosure until January 1, 2028.
Senators Weiner and Stern, the sponsors of SB 253 and SB 261, and other advocates strongly opposed the proposed delays. Opponents of the two laws, including plaintiffs challenging the laws in court, support the proposed delays.
With the end of the legislative session looming, Senators Weiner and Stern on August 13 proposed Senate Bill 219 (SB 219) to amend SB 253 and SB 261. On August 31, the California Assembly and Senate passed SB 219, which provides for the following changes to the two laws, among others.
Changes to The Climate Corporate Data Accountability Act (SB 253)
- The California Air Resources Board (CARB) will now have until July 1, 2025 to adopt implementing regulations, instead of January 1, 2025.
- The schedule for reporting entities to publicly disclose their Scope 3 emissions will now be determined by CARB, instead of within 180 days after Scope 1 emissions and Scope 2 emissions are disclosed. SB 219 will not change the 2026 deadline for reporting Scope 1 and 2 disclosures, and Scope 3 emissions will still be required to be disclosed beginning sometime in 2027 (as determined by CARB).
- Reports may now be consolidated at the parent company level. If a subsidiary of a parent company qualifies as a reporting entity, the subsidiary will not be required to prepare a separate report.
- The annual fee will no longer be due at the time of filing the report. The fee will still be required, but the date for payment is no longer specified.
Changes to The Climate-Related Financial Risk Act (SB 261)
- As with the amendments to SB 253, the annual fee required by SB 261 will no longer be due at the time of filing the required disclosures. The fee will still be required, but the date for payment is no longer specified.
What Next?
Governor Newsom has until September 30 to sign or veto SB 219. We expect that he will sign the Bill into law, though he may continue to advocate for delays in the reporting deadlines.
In the meantime, companies should continue to monitor the litigation challenging these laws, with oral arguments on motions for summary judgment in this matter scheduled for September 9.
In addition to the modifications being proposed to SB 253 and SB 261 by SB 219, the California legislature is also proposing to extend the compliance deadline for disclosures under AB 1305 to July 1, 2025, under Assembly Bill 2331. However, this bill did not clear the Assembly before the end of the legislative session. Absent approval during a special legislative session, which Governor Newsom has requested for other reasons, AB 2331 or a successor bill is unlikely to reach the governor’s desk in the near term.
