A handful of bills making their way through the California legislature signify an intensifying interest in the companies that make money in the world’s fifth largest economy and just how their operations contribute to emissions that exacerbate climate change.
California politicians want to require well-known brands like
Some of the bills also want companies to examine their financial risk from climate change related to assets, weather events, new laws, and other regulations that could be enacted to reduce risk. At least one of the bills would be the first of its kind in the nation if it became law.
“It’s good that there are various members who are working in this space. That’s powerful,” said Sen. Scott Wiener (D), who authored one of the bills, the Climate Corporation Accountability Act.
Representatives from Apple, Walt Disney,
The California Chamber of Commerce, which hasn’t placed any of the bills on its list of legislation it supports or opposes, didn’t immediately respond to a request for comment. The California Business Roundtable, which said in January that Wiener’s bill would increase the cost of doing business in California, also didn’t respond.
Wiener’s bill, SB 260, would require public emissions disclosures from companies that do business in California and have more than $1 billion in annual revenue.
The disclosures would include carbon emissions from electricity and power at company facilities, as well as indirect emissions at non-core functions along the supply chain. Companies also would have to set science-based reduction targets. More than 5,000 companies, including
“You cannot just regulate California emissions and protect California and its residents from the ravages of climate change, because greenhouse gas emissions know no boundaries,” said Catherine Atkin, co-director of Carbon Accountable, one of SB 260’s sponsors. “If you are benefiting from the largess of California as a market, you need to be a responsible actor.”
Other bills tackle financial risks from wildfires, erosion, extreme weather, sea-level rise, and other climate effects.
SB 449 by Sen. Henry Stern would require banks, corporations, credit unions, real estate investment trusts, mortgage lenders, and other related in businesses prepare and post online climate-related financial risk reports. It also would require the governor to create a Climate Change Financial Risk Task Force by 2023 to asses risks facing those entities.
Assembly member Jesse Gabriel (D) modeled his bill, AB 766, off U.S. Sen. Elizabeth’s Warren’s (D-Mass.) unsuccessful Climate Risk Disclosure Act of 2019. About 360 corporations and businesses would be affected.
Gabriel’s bill would direct the California Air Resources Board to create reporting rules for disclosing direct and indirect greenhouse gas emissions, establish a social cost of carbon metric, and require analysis of climate scenarios. Reporting would begin in 2025, with companies holding fossil fuel assets facing additional requirements.
The rule would apply to public companies with executive offices in California and annual revenues of more than $100 million. The state would also be required to evaluate climate risk when issuing bonds.
“There are extreme risks to our financial system,” Gabriel said. “Our sense is it’s not being properly captured.”
Washington is paying attention to the issue.
Rep. Nydia Velazquez (D-N.Y.) introduced March 10 a bill (H.R. 1`780) that would order the Securities and Exchange Commission to require public companies disclose in annual shareholder reports actions being taken to meet greenhouse gas emissions targets set forth in the Paris Climate Accord.
The Paris Agreement Disclosures Act would create standardized reporting and help encourage investors to examine climate action when investing, her office said in a news release.
The Institute for Policy Integrity at New York University School of Law and the Environmental Defense Fund published a report in February saying the SEC should mandate climate risk disclosures rather than rely on existing voluntary reporting.
The report cited another study that found 215 of the largest companies in the world have a combined potential $1 trillion in climate-related risk within the next five years.
The California bills are unique and states can drive SEC action, especially in terms of requiring emissions reductions, said Sarah Ladin, an attorney at the Institute for Policy Integrity who helped write the study.
“I think there is a role for states to determine what to do once that information has been provided,” she said.
California and New York tend to be leaders in this realm, Ladin said. New York’s Public Service Commission in October began looking at requiring investor-owned utilities to disclose the risks climate change to pose to the companies, investors, and customers.
An agency spokesman didn’t immediately respond to questions about where the state was in that process.
‘They Have a Responsibility’
The largest companies can pollute on a grander scale, obligating them to be more responsible, bill supporters say.
A 2020 Climate Accountability Institute report found that between 1965 and 2018, the 20 largest oil, coal, and natural gas companies in the world emitted 493 billion tons of carbon dioxide and methane, equivalent to 35% of all emissions from fossil fuel and cement operations since 1965. Third on that global list: Chevron USA based in San Ramon, Calif.
“Those largest companies are the ones that are creating a global economy,” Atkin said. “They have a responsibility to reduce the greenhouse gas emissions for the benefit of the world, but also for California.”
Two of the bills have committee hearings scheduled for April. Gabriel said he considers his bill, which is awaiting a hearing date, as an example of nudge politics and a starting point.
“We know it’s a hot topic and this a way for California to give energy to that,” he said. “The intent is to have these companies grapple with their choices.”