USA – CALIFORNIA Trends and Developments Contributed by: Bradley Rose and Clint Mead, Kaye, Rose and Partners LLP
CARB’s draft checklist for SB 253 reporting CARB has posted a Climate Related Financial Risk Report Checklist as well as a Microsoft Excel Draft Scope 1 and 2 GHG Reporting Template to its web- site , which can be downloaded. Reporting framework Companies must identify which reporting framework is being applied. CARB’s Draft Checklist is built on the Task Force on Climate-related Financial Disclosures (TCFD) framework. Minimum requirements are as follows: • state the reporting framework selected (eg, TCFD, IFRS S2, etc); • identify which recommendations and disclosures for the chosen framework are included and which are not; and • provide an explanation for omissions and discuss any plans for future disclosures. Governance Reports must describe the organisation’s governance structure, if any, for identifying, assessing and manag - ing climate-related financial risks. Minimum requirements are as follows: • describe governance processes and structure for identifying, assessing and managing climate risks; • discuss management’s role in overseeing risks and opportunities; and • describe Board oversight, if applicable. Strategy Reports should describe how climate-related risks and opportunities might impact corporate strategy. CARB does not require Climate Scenario Analysis (CSA) for the initial reporting year. Minimum requirements are as follows: • describe actual and potential impacts of climate risks and opportunities on operations, strategy and financial planning (where material);
• identify climate-related risks and opportunities over the short, medium and long term, and note which are considered material; and • explain the resilience of the company’s strategy in relation to climate change. Risk management Reports must show how climate-related risks are incorporated into the broader corporate risk manage - ment framework. Minimum requirements are as follows: • describe how climate risks are identified, assessed and managed; and • explain evaluation processes and integration into overall corporate risk management. Metrics and targets TCFD and IFRS S2 guidance recommends including GHG emissions data. However, CARB has speci - fied that entities are not required to disclose GHG emissions in SB 261 reporting during the initial year, particularly if this data was not collected prior to the enactment of the Acts. Minimum requirements are as follows: • disclose metrics and targets used to assess and manage material climate-related risks and oppor - tunities. Evaluation of compliance CARB has emphasised that initial compliance with the Acts will be evaluated based on a company’s good faith efforts in their reporting. Strict compliance with the Scope 1 and Scope 2 reporting for the initial year is not required for companies that did not collect this data. Companies are encouraged to submit inquiries to CARB at Climatedisclosure@arb.ca.gov. Conclusion While the California Air Resources Board (CARB) is still receiving feedback and drafting approaches to the implementation of the climate disclosure acts, the initial deadline for SB 261 (originally set for 1 January 2026) may be reset in the near future depending on the outcome of the Ninth Circuit appeal. CARB has
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