California’s recent budget approval to fund the implementation of the SB climate package bills marks a significant step forward in climate disclosure and accountability. This funding ensures that two critical pieces of legislation, SB 253 and SB 261, can be effectively executed, reinforcing California’s leadership in environmental regulation and climate risk management. Organizations like Ceres, a nonprofit advocacy organization working to accelerate the transition to a cleaner, more just, and sustainable economy, have been instrumental in advocating for such funding and highlighting the importance of transparent and accountable climate-related financial disclosures.
Background on SB 253 and SB 261
SB 253, also known as the Climate Corporate Data Accountability Act, mandates that companies doing business in California with at least $1 billion in revenue disclose their greenhouse gas (GHG) emissions across three scopes: Scope 1 (direct emissions), Scope 2 (indirect emissions from purchased electricity), and Scope 3 (all other indirect emissions in the value chain). This legislation follows the Greenhouse Gas Protocol, a globally recognized standard for GHG accounting.
SB 261, the Climate-Related Financial Risk and Disclosure Act, requires companies with revenues exceeding $500 million to disclose climate-related financial risks in alignment with the Task Force on Climate-related Financial Disclosures (TCFD) framework. Additionally, this bill includes assessments of governance, strategy, risk management, and metrics related to climate impacts.
Importance of the funding
The approved funding of $22 million is crucial for the California Air Resources Board (CARB) to develop and enforce the regulations necessary for these laws. This budget will support hiring staff to write detailed regulations, create a system for companies to report their data, and ensure compliance through enforcement mechanisms. With this financial backing, we could realize the ambitious goals of SB 253 and SB 261, leaving significant gaps in the state’s climate strategy.
Ceres actively advocated for this funding, highlighting that sufficient financial resources could significantly enhance these laws. Their advocacy underscores the necessity of robust financial support to ensure comprehensive implementation and compliance.
Impact on companies and investors
The implementation of these laws brings both opportunities and challenges for businesses. For companies, particularly those new to extensive climate reporting, the laws necessitate the establishment of robust data collection and reporting mechanisms. This reporting includes integrating climate data into existing accounting systems and ensuring the accuracy and consistency of reported information.
Investors stand to benefit significantly from these disclosures. With more comprehensive and standardized climate data, investors can better assess risks and opportunities associated with climate change. This development aligns with the growing recognition that climate risk is financial risk, enabling more informed decision-making and fostering a more resilient economy.
Global alignment
California’s legislation is not an isolated effort but a broader movement toward greater transparency in climate-related financial disclosures. These laws echo similar requirements being implemented globally, like the European Union’s Corporate Sustainability Reporting Directive (CSRD) and anticipated rules from the U.S. Securities and Exchange Commission (SEC). This alignment helps to avoid inconsistent reporting standards, confusion, and inefficiency in the market.
Funding California’s SB climate package bills is a pivotal development in the fight against climate change. California sets a precedent for rigorous climate disclosure standards by effectively implementing these laws. This move supports the state’s ambitious climate goals and provides a model for other jurisdictions. The enhanced transparency will drive better decision-making for companies and investors, ultimately contributing to a more sustainable and resilient global economy.
Ceres’s advocacy has significantly contributed to securing the necessary funding, ensuring that California’s climate legislation sets high standards and has the resources needed for successful implementation. This collaboration between state authorities and advocacy groups exemplifies how collective efforts can lead to substantial progress in addressing climate challenges.
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Sources:
1. Ceres, "Ceres welcomes funding for California climate disclosure laws in May budget proposal." https://www.ceres.org/resources/news/ceres-welcomes-funding-for-california-climate-disclosure-laws-in-may-budget-proposal
2. Sustain.Life, "Understand the Corporate Sustainability Reporting Directive (CSRD)." https://www.sustain.life/resources/regulation-guide-csrd
3. Sustain.Life, " Understand the California Climate Bills: SB 253 & SB 261." https://www.sustain.life/resources/regulation-guide-california-climate-bills
