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California Passes GHG Emissions Reporting and Climate-

Related Financial Risk Legislation

California and with annual revenue of over $500 million to publish a climate-related financial risk

report in accordance with the recommended framework and disclosures in the Final Report of

Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD

Recommendations).

In January 2023, California Senators Scott Wiener, Henry Stern, and Lena Gonzalez reintroduced revised

versions of three climate bills

2023, California Governor Gavin Newsom committed to signing two of those bills into law: the Climate

Corporate Data Accountability Act (

the TCFD Recommendations and the Greenhouse Gas Protocol (GHG Protocol) standards, it did not

wholly adopt either standard, arguably in order to afford flexibility for SEC registrants. SB 253 and

and TCFD Recommendations.

SB 253 would require companies doing business in California and with annual revenue of over $1 billion

starting in 2026 and annually thereafter. Reporting on Scope 3 emissions would be required starting in

2027 for the prior fiscal year.

While SB 253 would limit the reporting burden to corporations with revenue exceeding $1 billion,

corporations that are subject to the requirement could require smaller businesses in their value chains to

align with these requirements in order to facilitate the corporations’ compliance with SB 253. At present,

Senate Floor Analysis estimates that 5,344 companies would be required to report under SB 253.

business entity formed under the laws of California, any other US state, or the District of Columbia, or

under an act of Congress, with total annual revenue in excess of $1 billion and that does business in

California.

Notably, “doing business” in California utilizes the existing definition in § 23101 of the Revenue and Tax

Code, which includes: engaging in any transaction for the purpose of financial gain within California;

being organized or commercially domiciled in California; or having California sales, property, or payroll

exceed specified amounts. As of 2020, those amounts are $610,395, $61,040, and $61,040, respectively.

Under SB 253, the California Air Resources Board (CARB) would be required to develop and adopt

regulations on or before January 1, 2025, to govern the disclosure and assurance of such disclosure.

further the goals of SB 253. Reporting requirements under SB 253 would be separate from, and in

addition to, any facility-level GHG reporting requirements under California’s Mandatory Greenhouse Gas

Emissions Reporting program.

beginning in 2030. SB 253 would require CARB in 2026 to assess the feasibility of obtaining assurance

for Scope 3 emissions; on or before January 1, 2027, CARB could establish an assurance requirement

for Scope 3 emissions beginning in 2030, though Reporting Entities would be required to obtain only a

limited assurance. While the assurance process lacks further detail, SB 253 would nevertheless require

assurance providers and ensures sufficient assurance provider capacity.

The violator’s past and present compliance.

Whether the violator took good-faith measures to comply and when those measures were taken.

With respect to Scope 3 emissions reporting:

A Reporting Entity cannot be subject to an administrative penalty under SB 253 for any

misstatements with regard to Scope 3 emissions disclosures “made with a reasonable basis and

disclosed in good faith.”

revenue threshold and conduct business in California, whereas the SEC Climate Proposal would

apply only to SEC registrants with reporting obligations pursuant to Section 13(a) or Section 15(d) of

the Exchange Act and companies filing a Securities Act or Exchange Act registration statement.

Notably, SB 253 would not apply to foreign-incorporated companies doing business in California,

whereas the SEC Climate Proposal would apply to foreign private issuers.

Scope 3 emissions. SB 253 would arguably impose stricter requirements than the SEC Climate

Proposal by requiring all subject entities to report all Scope 3 emissions in accordance with the

GHG Protocol. The SEC Climate Proposal would require registrants to disclose Scope 3 emissions

metrics only to the extent that they are material or that the company has established targets

Verification vs. assurance. SB 253 would require immediate independent verification of the Reporting

Entity’s Scope 1 and Scope 2 emissions disclosure by the emissions registry or a third-party auditor

approved by CARB and with expertise in GHG emissions accounting. In contrast, the SEC Climate

Proposal would mandate only large accelerated filers and accelerated filers to include in the relevant

filing an attestation report covering the disclosure of Scope 1 and Scope 2 emissions only and to

provide certain related disclosures about the service provider used.

SB 261 would require entities formed under US law that do business in California and have total annual

revenue in excess of $500 million (Subject Entities) to prepare and submit to CARB a climate-related