Understanding the Greenhouse Gases: Climate-Related Financial Risk Act (Schneider Downs)
Sustainability
December 19, 2023 - Schneider Downs & Co., Inc.This is a thought leadership article from PrimeGlobal member firm Schneider Downs on the Greenhouse Gases: Climate-Related Financial Risk Act which was recently signed into Californian law. The article breaks down each piece of legislation and answers the key questions organizations are asking themselves, including requirements and timelines.
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On October 7th, California Governor Gavin Newsome signed the Greenhouse Gases: Climate-Related Financial Risk Act (CA SB 261).
The climate-focused legislation will impact thousands of companies, both public and private operating in California. This article will breakdown each legislation and answer the key questions organizations are asking themselves as the journey to California’s new climate legislation begins.
What is the Greenhouse Gases: Climate-Related Financial Risk Act?
The Greenhouse Gases: Climate-Related Financial Risk Act (CA SB 261) requires both public and private companies meeting revenue requirements and operating in the state of California to produce an annual report summarizing both their climate-related financial risk and the steps they will take to reduce and adapt to it.
Who Does CA SB 261 Apply To?
CA SB 261 affects corporations, limited liability companies, other business entities and specified partnerships with total annual revenues greater than $500 million and operating in California.
How Does CA SB 261 Define a Climate-Related Financial Risk?
A climate-related financial risk is defined as any material risk to immediate or long-term financial outcomes due to physical and transition risks.
What are the CA SB 261 Requirements?
Produce a report summarizing the entity’s climate-related financial risks in alignment with the final recommendations of the Task Force on Climate-Related Financial Disclosure (TCFD) from 2017.
Organizations must disclose which measures they’re taking to reduce and adapt to the climate-related financial risks that they’ve disclosed. The organizations must submit a statement to the CA Secretary of State affirming that the disclosed report satisfies the requirements of the signed bill.
The final report must be made available to the public on the organization’s website.
What is the CA SB 261 Framework?
CA SB 261 reporting will use the TCFD framework.
What is the CA SB 261 Timeline?
The TCFD report is due no later than January 1, 2026.
Organizations impacted by CA SB 261 need to start preparing for the California climate disclosure immediately. By properly preparing for the disclosures, your organization will have stronger controls over emission data and reporting and avoid the risks and penalties associated with non-compliance.
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Schneider Downs & Co., Inc.
Schneider Downs is a top regional accounting and business advisory firm located in the northeastern part of the United States with a significant international reach. For more than 60 years, we have provided professional services to public and private companies, nonprofit organizations, professional associations, service firms and government entities across the United States and around the world. We have more than 500 employees and 56 shareholders and offer more than 100 services with dedicated teams from four business units: Tax, Audit, Consulting and Wealth Management.
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