California poised to adopt emissions, climate risk reporting laws

California lawmakers have advanced two proposed state laws to require companies doing business in the state to report their greenhouse gas emissions and prepare biennial reports on their climate-related financial risks. If signed by Gov. Gavin Newsom, the laws would be the first of their kind in the nation. Newsom has until mid-October to decide whether to sign or veto both bills.

The Climate Corporate Data Accountability Act would require businesses with annual revenues of more than $1 billion to report their direct and indirect emissions to the state every year. The California Senate and Assembly earlier this week voted in favor of the bill. In a July letter, the American Bankers Association, California Bankers Association and five other financial industry associations argued the bill would not meet its stated goals. The proposed law would require businesses to report scope 1 and 2 emissions coming directly from their operations as well as scope 3 “value chain” emissions over which they have no direct control, such as the emissions generated when customers use their products. The associations noted there are no widely accepted methodologies for calculating scope 3 emissions.

A related bill going to Newsom’s desk would require biennial climate-related financial risk reports from businesses with total annual revenues of at least $500 million, starting in 2026. The reports must include measures a business has taken to reduce and adapt to climate-related financial risks. Covered entities would be required to pay an annual fee to cover the cost of administrating the law.