California’s climate disclosure rules withstand legal challenge

"At Minerva, we believe investors should vote their values. Our unique vote policy system and research support diverse perspectives. Clients can opt in or out of guidelines at no extra cost to align with their objectives. As ESG and climate factors are legally required for many, Minerva continues to provide diversity and climate- related guidelines." Minerva Analytics

February 13, 2025

A judge has dismissed the US Chamber of Commerce's lawsuit against California over its laws requiring large companies to report Scope emissions and disclose climate-related financial risks.

US District Judge Otis Wright II rejected claims that SB 253 and SB 261, which were signed into law by California’s governor in October, violate the constitution and extraterritoriality rules.

SB 253 requires companies with revenues greater than $1 billion that do business in California to report annually on their direct Scope 1 and 2 emissions, and Scope 3 value chain emissions.

Meanwhile, SB 261 applies to US companies with revenues over $500 million that operate in California, requiring them to disclose their climate-related financial risks and outline strategies to mitigate and adapt to those risks.

Following the implementation of the regulation, the US Chamber of Commerce filed a lawsuit against the state of California, arguing that the new rules would violate the first amendment by forcing businesses to engage in subjective speech.

The lawsuit also argued that accurately calculating supply chain emissions can be nearly impossible for companies and that the rules would require them to subjectively report their global climate-related financial risks and proposed mitigation strategies.

However, the judge dismissed the Chamber's claims, including the argument that SB 261 violated the law by attempting to regulate greenhouse gas emissions through public disclosure aimed at shaming companies.

The judge noted that the law does not impose liability for failing to reduce emissions, but only for failing to disclose climate-related financial risks and the measures taken to address them.

While the judge sided with California's arguments, the case has not been dismissed, allowing the Chamber of Commerce to continue its challenge against the climate disclosure laws.

Minerva’s blog focuses on the latest developments in ESG investing and stewardship. Minerva is a global provider of sustainable stewardship solutions with over 25 years of expertise. Minerva empowers investors by providing essential tools, including ESG research and data, enabling them to navigate the intricate landscape of stewardship and proxy voting, whilst ensuring their decisions are well-informed and aligned with sustainable principles.

You can read more of our articles by clicking here.