On October 7, 2023, California’s Governor Newsom signed two significant pieces of legislation – Senate Bills 253 and 261. These new laws considerably broaden the disclosure requirements for California-based companies in terms of their greenhouse gas emissions and any climate-related financial risks. The aim is to increase transparency and accountability regarding corporate environmental responsibility.
Senate Bill 253 concentrates on greenhouse gas emissions. Under this legislation, all companies situated in California are required to report their greenhouse gas emissions in a clear, transparent manner, according to law firm Cadwalader, Wickersham & Taft LLP. This disclosure is not only confined to the companies themselves but also includes any significant suppliers or sources of greenhouse gases tangentially linked to their operation.
Meanwhile, Senate Bill 261 targets financial risks associated with climate change. It requires companies to also disclose any kinds of financial risks they are exposed to due to climate change. This can range from the direct impact on operations due to extreme weather events to more indirect risks linked to transitioning towards a greener, low-carbon economy.
The signing of these bills by Governor Newsom marks a significant step towards enhancing corporate transparency in California. The increased disclosure requirements are set to provide lawyers, shareholders, and the public a more comprehensive view of a company’s climate-related activities and risks. Furthermore, these laws may inspire similar legislation in other states and countries aiming to hold corporations accountable for their environmental impact.