As anticipated, on September 27, California Governor Gavin Newsom signed into law Senate Bill 219 (SB 219), after the California legislature passed it on August 31, 2024. SB 219 amends the Climate Corporate Data Accountability Act (SB 253) and the Climate‐Related Financial Risk Act (SB 261), both of which are summarized in our previous blog post.
SB 253 and SB 261 impose certain reporting requirements on U.S.
public and private companies "doing business" in
California that meet certain financial thresholds, that is, more
than $1 billion under SB 253 and more than $500 million under SB
261. SB 253 requires disclosure of Scopes 1, 2, and 3 greenhouse
gas (GHG) emissions and SB261 requires the submission of a biannual
climate-related financial risk report to the California Air
Resources Board (CARB) starting as early as January 1, 2026, for
calendar year 2025.
Under SB 219, the amendments include:
- A six‑month extension until July 1, 2025 (from January 1, 2025) for CARB to promulgate its rulemaking for SB 253.
- Granting CARB the responsibility to set the schedule for disclosure of Scope 3 GHG emissions under SB 253, rather than requiring disclosure within 180 days after a covered entity's Scope 1 and 2 emissions reporting. Reporting would still be required beginning in 2027.
- Providing reporting companies the ability to consolidate disclosures under SB 253 at the parent-company level and exempting subsidiaries from separate reporting (to match SB 261).
- Removing the requirement for CARB to contract with a climate reporting organization to prepare the reports on climate‑related financial risk disclosures under SB 261. SB 219 now permits CARB, at its option, to assume these duties rather than engaging a third party to perform them.
- Eliminatingthe requirement that reporting entities pay a filing fee when filing their disclosure reports under SB 253 and SB 261. While the time period for when an entity pays the fee has changed, the fee itself has not.
Notably, SB 219 does not significantly affect the reporting deadlines under SB 253 and SB 261. Accordingly, Scope 1 and 2 disclosures will remain due in 2026, Scope 3 disclosures will still be due sometime in 2027, and climate‑related financial risk disclosures will remain due by January 1, 2026.
Both SB 253 and SB 261 are currently the subject of litigation in the U.S. District Court for the Central District of California. In contrast to the Securities and Exchange Commission (SEC) climate disclosure rules, however, these rules have not been stayed pending the outcome of the litigation. The motions for dismissal and summary judgment have been briefed and the next court hearing is scheduled for October 15, 2024. Several states are tracking the outcome of this legislation and may consider introducing related state-level disclosure requirements in the future.
To the extent in-scope companies do not already have the accounting, governance, planning and operational mechanisms in place to collect and disclose the data required by this new legislation, companies are strongly encouraged to begin preparing as soon as possible. The process of generating disclosure-ready data will involve a number of resources and careful planning.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
