California, August 26, 2025
News Summary
On October 14, 2023, the California Air Resources Board (CARB) will propose new climate disclosure regulations. Under the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act, large companies must report greenhouse gas emissions and climate-related financial risks. This initiative enhances transparency on climate impact and includes substantial reporting requirements for companies generating substantial revenue. The proposal follows a public engagement process and seeks to foster accountability in corporate governance regarding climate change, with the final regulations expected to be considered in December 2023.
California to Propose New Climate Disclosure Regulations on October 14, 2023
The California Air Resources Board (CARB) will propose new climate disclosure regulations on October 14, 2023, following the enactment of two significant laws aimed at enhancing corporate transparency regarding climate change. Governor Gavin Newsom signed the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261) into law earlier this year. These laws are set to hold large companies accountable for their greenhouse gas emissions and climate-related financial risks.
Under SB 253, companies generating over $1 billion in annual revenue must report their Scope 1 and Scope 2 emissions, focusing on direct and indirect emissions from their operations. Future provisions will expand these requirements to include Scope 3 emissions, which cover all other indirect emissions within the company’s value chain. Meanwhile, SB 261 aims to require firms with at least $500 million in revenues to prepare biennial climate-related risk reports detailing their vulnerabilities to climate impacts and governance strategies for managing these risks.
While CARB initially planned to finalize regulations by July 1, the agency has since adjusted its schedule, now anticipating board consideration on December 11-12, 2023, following a 45-day comment period. Estimates suggest that 4,160 businesses will be subject to the reporting requirements of SB 261, and 2,596 firms will need to comply with SB 253’s emission disclosures. CARB is currently validating the preliminary list of companies affected by the new laws.
Implementation Costs and Fees
Implementing these laws will incur a one-time cost of approximately $20.7 million, funded temporarily through the Inflation Reduction Act’s Greenhouse Gas Reduction Fund. Ongoing costs related to enforcement and compliance are estimated at $13.9 million annually. Companies under SB 253 will pay an annual fee of approximately $3,106, while those under SB 261 will incur fees of around $1,403. Companies classified under both laws will incur fees from both regulations.
Exemptions and Enforcement
Entities such as non-profits, teleworking-only firms, government agencies, and specific wholesale electricity businesses will be exempt from these legislative mandates. Furthermore, an initial enforcement notice highlights that CARB will not impose penalties in the first year for incomplete data, provided companies demonstrate a good faith effort to collect accurate emissions data.
Public Engagement and Future Challenges
CARB has engaged with the public through workshops, with the first session held in May. Feedback from these sessions is being collected until September 11, 2023, with a compliance FAQ document made available for businesses seeking clarity regarding the standards. The legislation, despite facing several legal challenges, has continued to advance, with a federal judge recently refusing to issue a preliminary injunction against these regulations.
Looking ahead, potential political changes in leadership may affect the investment perspective on environmental, social, and governance (ESG) issues. Anticipated shifts in governance in 2025 could lead to a more adversarial approach towards ESG frameworks.
Conclusion
With the proposed climate disclosure regulations, California is taking significant steps to enhance corporate accountability for climate-related impacts. As these regulations develop, businesses will need to adapt to the increasing demands for transparency in their emissions and risk management practices.
FAQ
What are SB 253 and SB 261?
SB 253 requires large companies to report their Scope 1 and Scope 2 emissions, while SB 261 mandates climate-related risk reports for mid-sized companies.
How will these laws impact businesses?
Approximately 4,160 firms will need to prepare climate-related risk reports, and 2,596 will report their emissions under the new laws. This implies increased transparency and accountability regarding climate change effects.
When will the proposed regulations be finalized?
The California Air Resources Board is set to consider the proposed regulations on December 11-12, 2023, following a 45-day comment period.
Key Features of the Regulations
| Feature | SB 253 (Emission Reporting) | SB 261 (Risk Reporting) |
|---|---|---|
| Threshold Revenue | $1 Billion | $500 Million |
| Scope of Reporting | Scope 1 & 2 Emissions | Climate-Related Risks |
| Annual Fees | $3,106 | $1,403 |
| Compliance Timeline | Initial Report due 2026 | Biennial Reports |
| Penalties for Non-compliance | Not in the first year | Not in the first year |
Deeper Dive: News & Info About This Topic
- ESG Dive: CARB to Propose California Climate Risk Disclosure Rules
- Wolters Kluwer: California Climate Disclosure Laws
- ESG Today: California Releases FAQ for Climate Reporting
- Wikipedia: Climate Disclosure
- Encyclopedia Britannica: Environmental Disclosure
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