Climate disclosure in US strong at state level

July 19th, 2024

California, Illinois and New York have pushed ahead with climate disclosure requirements despite legal push back on the Securities and Exchange Commission’s (SEC’s) final regulations.

The SEC finalised its climate disclosure rules in March after more than a year wrestling over the requirements, but the requirements faced legal push back from Republicans almost immediately, leading to a US court pausing the implementation less than two weeks later.

Last month, the rules were challenged again by a group of 35 Republican lawmakers.

However, at a state level there is progress being made. California has led the charge, with the state’s governor passing new legislation requiring corporations to disclose their Scope 3 carbon emissions back in October.

Some experts projected that this legislation could provide political cover for the SEC to include Scope 3 emissions in its final requirements, but the regulator ultimately left Scope 3 emissions out of the final rules.

Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization, and requirements to report on them are widely opposed by most companies, who argue it is too difficult to gather data on them to disclose.

Similar legislation is now being passed in other states including Illinois and New York.

New York’s Senate Bill S897A will the climate corporate data accountability act requiring certain business entities within the state to annually disclose Scope 1, Scope 2 and Scope 3 emissions. The rules will apply to businesses with total annual revenues in excess of $1 billion.

In Illinois, the Climate Corporate Accountability Act (HB4268) similarly would require US entities with total annual revenues over $1 billion to annually disclose and verify their scope 1, 2 and 3 emissions.

At a federal level, the Federal Supplier Climate Risks and Resilience Rule is set to be finalised this year, ESG News reports.

The rule, which was proposed in 2022, will mandate emissions inventories and climate-related financial risk disclosures for significant and major contractors and federal suppliers.

Contractors with $7.5 million to $50 million in federal contracts must disclose Scope 1 and 2 emissions, while major contractors, those over $50 million in contracts, must also report Scope 3 emissions and develop science-based GHG reduction targets.

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