David A. Bell is a Partner, and Ron C. Llewellyn and Emily Sacks-Wilner are Counsels at Fenwick & West LLP. This post is based on their Fenwick memorandum. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) by Lucian A. Bebchuk and Roberto Tallarita; For Whom Corporate Leaders Bargain (discussed on the Forum here) and Stakeholder Capitalism in the Time of COVID (discussed on the Forum here) both by Lucian Bebchuk, Kobi Kastiel, Roberto Tallarita; and Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock (discussed on the Forum here) by Leo E. Strine, Jr.
While all eyes are on proposed federal and European climate disclosure rules, the California legislature passed two climate-related bills that overlap somewhat with the Securities and Exchange Commission (SEC)’s proposed climate rules (see our client alert on the proposal). Senate Bill 253, the Climate Corporate Data Accountability Act, requires California’s State Air Resources Board (CARB) to adopt regulations requiring U.S. companies that do business in California to publicly disclose their Scope 1, Scope 2 and Scope 3 greenhouse gas emissions. Companies will also need to receive independent third-party assurance of their Scope 1 and 2 emissions data to start, with the potential for Scope 3 emissions assurance if CARB establishes such a requirement. Senate Bill 261, Greenhouse Gases: Climate-Related Financial Risk, requires companies to publicly disclose a climate-related financial risk report regarding their climate-related financial risks and any risk mitigation and adaptation measures for such risks. These bills, if adopted, would apply to private and public companies with specified revenue levels that also do business in California—and impose significant burdens in terms of compliance efforts and related expenses.
Notably, SB 253 was introduced and failed in a prior legislative session, but there seems to be a larger amount of support this time around, including from companies like Apple. The California Assembly and Senate passed and sent the bills to Governor Gavin Newsom, who has until October 14 to sign or veto them.