California’s First-in-the-Nation Climate Disclosure Legislation Sets New Standard for Corporate Transparency
September 12, 2023 /3BL/ - Ceres applauds the California State Assembly for voting to approve first-in-the-nation transparency into the climate impacts of the largest corporations for investors, consumers, employees, and communities.
The Assembly today passed the first of two proposed bills related to corporate climate disclosure: SB 253, which will require companies that do business in California and earn at least $1 billion annually to report climate pollution across their supply and value chains. The Assembly is expected to vote later this week on the second bill, SB 261, which will require companies with revenue over $500 million to report on their climate-related risks.
The vote puts California in the position to implement the U.S.’s first-ever economy-wide mandatory climate disclosure policy, helping the state and the nation keep pace as regulators in the E.U. and around the globe implement similar policies designed to give investors better insight into how companies are managing the financial risks of climate change.
“Investors, consumers, and other stakeholders have always deserved transparency about how companies are managing the greatest risks facing their businesses and the economy, and climate change should be no different,” said Steven Rothstein, managing director, Ceres Accelerator for Sustainable Capital Markets. “Leading companies that already voluntarily disclose efforts to manage climate risk also deserve a standardized and consistent reporting framework that allows them to be fairly compared across companies and sectors. These bills are a smart response to the growing global momentum for corporate climate disclosure, and Ceres urges Gov. Newsom to sign them into law as soon as possible.”
“We applaud the Assembly for passing legislation that provides the transparency, consistency, and standardization necessary to assess corporate climate risk in the world’s fifth largest economy,” said Alli Gold Roberts, senior director of state policy, Ceres. “We urge Gov. Newsom to quickly sign these bills into law so that California can again lead the nation in a key area of public policy.”
A co-sponsor on the two bills and a longtime supporter of corporate climate disclosure requirements, Ceres has rallied company and investor support for SB 253 and SB 261 throughout 2023. In August, more than 20 companies, institutions, and industry groups signed separate letters supporting each bill, demonstrating significant corporate support for the reporting framework; companies including Microsoft, Sierra Nevada Brewing, Adobe, Atlassian, IKEA USA, and REI Co-op each signed at least one letter. Salesforce, Apple, and Google have also issued their own statements in support of SB 253, as did clothing industry groups including the American Apparel & Footwear Association.
The bills would complement the U.S. Securities and Exchange Commission’s proposed rule requiring climate disclosure for public companies, as well as the global standards expected to be finalized this year by the International Sustainability Standards Board. Because the California bills would apply to both public and private companies over certain revenue thresholds, they would broaden the coverage of companies required to provide information beyond the SEC’s proposed disclosure standards. If signed into law, SB 253 would apply to more than 5,300 companies and SB 261 would cover more than 10,000 companies.
Consumers and investors alike have been making their desire for climate disclosure increasingly clear in recent years. According to a recent survey, 85% of Americans said companies should disclose more about the impact of their business practices, and 87% support mandatory climate disclosure. And in 2022, more than 500 investors representing nearly $40 trillion in assets under management called for governments around the world to strengthen climate disclosure standards, such as by requiring mandatory reporting.
Ceres is a nonprofit organization working with the most influential capital market leaders to solve the world’s greatest sustainability challenges. Through our powerful networks and global collaborations of investors, companies and nonprofits, we drive action and inspire equitable market-based and policy solutions throughout the economy to build a just and sustainable future. For more information, visit ceres.org and follow @CeresNews.
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