California has become the first state in the US to force companies to publicly report greenhouse gas emissions and disclose climate-related financial risk.
The passing of SB-253 means that accurate and comprehensive data that is subject to an assurance engagement performed by an independent third-party assurance provider will now be required to determine a company’s carbon footprint, and to effectively identify the sources of the emissions to develop means to reduce them.
Meanwhile, SB-261 requires large corporations to prepare and submit annual climate-related financial risk reports, publicly disclose their climate-related financial risks and the methods they are using to mitigate them.
Given that California is set to become the fourth largest economy in the world in the near future, investors, consumers and other stakeholders have been looking for transparency from companies regarding their GHG emissions and potential risks to inform their decision making.
Ahead of the vote on SB-253, companies such as Apple, Google and Microsoft, as well as individuals like Mary Nicols, former chair of the California Air Resources Board, came out to support SB-253.
“California is a big, innovative economy that has proven that economic growth can be decoupled from emissions. Now, we must get accurate reporting of those emissions and risks,” said Nichols in her open letter.
“Our sophisticated government regulatory agencies are up to the task; the expertise of the California Air Resources Board should provide confidence to all parties involved in implementation.”
Reaction
In a statement, Maria Lettini, CEO of the US Sustainable Investment and Finance Association and member of the ESG Clarity US Committee, said that the bills represent an important step forward around transparency for investors by providing more standard information for investors to consider when making financial decisions.
“Given the large number of companies operating in the state, this legislation will have significant global implications,” the statement continued.
“The impacts of climate change have material and financial ramifications for investors, who need clear, comparable and reliable climate-related data to make financial decisions. We encourage Governor Newsome to demonstrate strong leadership by signing this bill into law swiftly to bring the US in line with the global community.”
Leslie Samuelrich, president of Green Century Funds and member of the ESG Clarity US Committee, said that it is important that investors know the full scope of a company’s carbon pollution.
“The impacts of climate change have material and financial ramifications,” she continued. “Californian companies will now be better positioned to meet investor expectations by providing clear, comparable and reliable climate-related data.”
“Speaker Robert Rivas and his leadership team have shown enormous leadership, vision and commitment to protecting Californians now and in the future,” stated Mary Creaseman, CEO of the one of the sponsors of the bill, the California Environmental Voters lobby group.
“Up against the most powerful and resources interests in our state, the Assembly stood strong and advanced world-changing policy, yet again proving our state’s critical role in the global fight against the climate crisis.”