(October 7, 2023) – California has two new laws requiring large companies doing business in California to disclose their risks from climate change. This is a crucial step to ensure that investors have the information they need to make smart financial decisions.
Governor Gavin Newsom signed bills SB253 and SB261 today.
“Climate-related financial risks are already serious and are getting worse. Climate-amplified weather disasters, such as heat waves, wildfires, and floods, cause billions of dollars in damages each year,” says the Environment. said Michael Panfil, senior director of climate risk and clean power at the Defense Fund. Understanding the nature and extent of climate risks is important, and California’s action today is an important step toward meeting that need. ”
The new law applies to businesses doing business in California. SB 261 applies to businesses with annual revenues of at least $500 million. These companies will be required to disclose information about their climate risk management. SB 253 applies to companies with at least $1 billion in annual revenue and would also have to disclose their greenhouse gas emissions.
California has adopted legislation to increase transparency regarding climate-related financial risks. Report release by the Treasury Department-led Financial Stability Oversight Council. “Climate change poses an emerging threat to U.S. financial stability,” the report said.
The legislation is also consistent with actions around the world, as regulators and legislators in multiple countries seek to make disclosure of climate-related financial risks on par with disclosure of other forms of financial risk. Countries including the UK, New Zealand and Japan have already taken steps to require financial systems to proactively identify and understand the growing harms of climate change.
The U.S. Securities and Exchange Commission has also proposed standards that would require public companies to disclose climate-related financial risks to ensure investors are fully informed. California’s new law is designed to work with these other standards and minimize duplication of efforts by companies.
Investors, asset managers and companies are increasingly clear that they urgently need the information made possible through climate-related financial risk disclosures, and that it is possible to do so today.In California this includes: More than ten companies.
“Our economy is healthiest when investors have the relevant data and can make informed decisions based on that information,” Panfil said. “An economy where the financial risks of climate change are better understood and disclosed will strengthen the financial resilience and stability that is essential for everyone.”