Effective dates near for California climate laws
Hot Topic | October 2024
Limited amendments provide some reporting relief as implementation nears for California climate disclosures.
In October 2023, the California Governor signed three climate disclosure laws that shape climate disclosure practices beyond the state’s borders.
SB-253 (GHG emissions) and SB-261 (climate risks) apply to US businesses that meet specified revenue thresholds and do business in California.
AB-1305 (carbon offsets) applies to US and international companies that undertake specified activities in California or make certain claims.
Latest developments
Since the laws were originally signed in October 2023, certain amendments have been proposed and/or approved.
Approved amendments to GHG emissions and climate risk disclosures
In September, Governor Newsom signed into law SB-219, which makes the following amendments:
- Defers by six months to July 1, 2025, the date for California Air Resources Board (CARB) to adopt regulations – i.e. diverging from a previously proposed two-year delay.
- Permits reporting at the consolidated parent company level for GHG emissions – i.e. mirroring the relief in SB-261.
Notably, SB-219 maintains the 2026 effective date for reporting GHG emissions and climate risks – i.e. diverging from a previously proposed two-year delay.
Proposed amendments to carbon offsets disclosures
Introduced in March 2024, AB-2331 would amend AB-1305 (carbon offsets). The original proposal would have deferred the effective date by one year (to January 1, 2025) and excluded renewable energy certificates (RECs), among other things.
In August, California legislators further modified AB-2331 so that it would defer the effective date of AB-1305 to July 1, 2025 – i.e. a further six-month delay from the original proposal. The proposal to exclude RECs has also been withdrawn.
Applicability
- The Climate Corporate Data Accountability Act (SB-253) and final amendments (SB-219)
- Climate-Related Financial Risk Act (SB-261) and final amendments (SB-219)
- Voluntary Carbon Market Disclosures Act (AB-1305) and proposed amendments (AB-2331)
Relevant dates
- The laws were signed by Governor Newsom in Oct 2023
- Amendments to SB-253 and SB-261 were signed by Governor Newsom on Sept 27, 2024
- SB-253 and SB-261 are effective for reporting in 2026
- AB-1305 was effective Jan 1, 2024; a proposed amendment would change that date to July 1, 2025
Key impacts
There has been mounting pressure from governments and shareholders for companies to disclose their GHG emissions, describe their use of carbon offsets and report on climate-related risks. For most US companies, the current approach for such disclosures relies largely on voluntary reporting.
This is changing, as evidenced by reporting requirements on the national level (the SEC’s climate rule, now stayed) and international developments (standards from the International Sustainability Standards Board (ISSB) and European Sustainability Reporting Standards). The California laws represent a new dimension, with state-level requirements that have national and international implications.
In the movement to improve transparency and standardize climate-related disclosures, California passed three laws that apply to both public and private US companies (and other business entities) that either undertake in specified activities in California or do business in California – whether or not they are physically present in the state.
Report contents
- Fast facts, impacts, actions
- Background
- A broad scope
- Targeted disclosures
- Effective dates are coming soon
- Assurance required from the outset
- Comparison to the SEC’s climate rule (now stayed)
- Other US states progressing similar laws
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