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On October 7, 2023, Governor Gavin Newsom of California signed into law two climate disclosure bills passed by the California Legislature. These laws now require that "by January 1, 2025 . . . businesses with total annual revenues over $1 billion and operating in California [shall] disclose their greenhouse gas emissions" and that "businesses with total annual revenues over $500 million and operating in California, beginning January 1, 2026 . . . [shall] develop a report on [] climate-related financial risks." Notably, the law concerning disclosure of greenhouse gas emissions requires disclosure of Scope 1, Scope 2, and Scope 3 emissions.

Despite signing these laws, Governor Newsom expressed some concerns regarding their feasibility, echoing the criticism expressed towards these laws by political opponents in the legislative process. In particular, Governor Newsom focused on two critiques: (1) that "the implementation deadlines in this bill are likely infeasible," and (2) the "overall financial impact of this bill on businesses." Although these concerns did not convince Governor Newsom to abandon the climate disclosure bills, he did "direct[] [his] Administration to work with . . . the Legislature next year to address these issues." Such a signing statement indicates that Governor Newsom may be receptive to "modifications" and to suggestions to "streamline the program." Of course, it is not clear what changes, if any, would be acceptable to the California Legislature.

These climate disclosure laws in California will have a nationwide impact. First, the laws are drafted so as to apply to all businesses (above a certain size) that "operat[e] in California." Based on commentary surrounding these laws, it is expected that California will apply the concept of "doing business" in California broadly, so that many significant national and international companies will be subject to this disclosure regime. And the fact that California has such a significant economy, featuring the presence of many large firms, will further heighten the impact of this law. Second, this law will exert indirect pressure on companies that do not do business in California but rather do business with companies that do business in California (in effect, companies at one remove from California). The companies that actually conduct business in California will require information from their commercial counterparties in order to comply with this climate disclosure requirement, and so companies that are not targeted themselves by the law will nonetheless experience regulatory pressure. Finally, the fact that California has enacted these laws may encourage other progressive-leaning states to do so, as well as exert pressure on the Biden Administration's SEC to finalize and promulgate its own rules concerning climate disclosure.

I am signing Senate Bill 253 which would require, among other things, the California Air resources Board (CARB), by January 1, 2025, to develop and adopt regulations requiring businesses with total annual revenues over $1 billion and operating in California to disclose their greenhouse gas emissions to an emissions reporting organization.

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.

Jacob Hupart
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