Dive Brief:
- The California Air Resource Board voted Thursday to approve the text of two climate disclosure regulations, Senate Bills 253 and 261, pushing the laws a step closer to final adoption.
- The agency, responsible for oversight of the state’s climate disclosure rules, approved the regulations during a public hearing. The adopted regulation under the two bills establishes the compliance fees, key definitions and deadlines that closely mirror the text of the rules CARB released in December.
- The pair of regulations require emissions reporting and climate-related financial risk reporting from companies who do business in the state. However, compliance with the climate-risk reporting law — SB 261 — is voluntary at the moment, as a federal appeals court has paused implementation while it hears the case.
Dive Insight:
California’s corporate climate disclosure laws were first signed into law in 2023, and Thursday’s approval will allow CARB to administer and fund the reporting programs established by the bills, according to a Feb. 26 press release.
SB 253, the Climate Corporate Data Accountability Act, requires companies that do business in California with over $1 billion in revenue to report their greenhouse gas emissions. This year that will include companies’ scope 1 and scope 2 emissions, and companies are expected to report to the state by Aug. 10.
SB 261, or the Climate-related Financial Risk Act, requires companies that do business in the state with over $500 million in revenue to disclose climate-related financial risk reports to the state. The original submission deadline was Jan. 1. However, enforcement of the law is enjoined by litigation in the Ninth Circuit of Appeals, so any compliance for companies is voluntary at this point, CARB said in an enforcement notice. Over 120 companies have voluntarily submitted reports to the public docket as of Feb. 27, according to ESG Dive’s review of the database.
“By establishing clear and consistent disclosure requirements, California is ensuring that the state’s investors and consumers have access to reliable information to inform their decisions and is joining other jurisdictions around the world in requiring climate data transparency,” CARB Chair Lauren Sanchez said in the release.
Sanchez said business leaders have chosen to engage early in the process, which gives “a clear indication they recognize the importance of climate-related risk transparency to inform business and consumer decisions.”
As CARB has worked to promulgate rules for the climate disclosures, it has emphasized that it does not plan to take enforcement action in its first year and is looking for companies to make good faith efforts to comply.
The U.S. Chamber of Commerce and other business groups led the litigation in the Ninth Circuit that led to the preliminary injunction on SB 261. While the group applauded the injunction on the climate-risk reporting law, the lawsuit is also seeking to enjoin implementation of the emissions disclosure law.
Due to the court case, The Conservation Fund Executive Vice President and General Counsel Kristina Wyatt said in a LinkedIn post that the approval “is perhaps less significant than would be the case were there not pending litigation holding both laws in limbo.”
Wyatt, who served as a temporary special senior counsel for climate and ESG at the Securities and Exchange Commission from 2021-22, noted that the Chamber of Commerce lawsuit also looks to pause implementation of SB 253. As such, companies have to wait for a ruling in that case, which Wyatt said “will dictate whether the August 10, 2026 reporting deadline for reports under SB 253 will hold.”
Further, attorneys at law firm Ropes & Gray said in a Thursday note that the “skinny regulation” — currently at seven pages — approved on Feb. 27 “only addresses a limited number of the compliance items subject companies have been grappling with.” The lawyers anticipate that CARB will presumably hold additional workshops and publish guidance, reporting templates and FAQs over time, in addition to adopting more requirements outlined under SB 253.
