Analysis-Companies fear lawsuits from California's climate disclosure rules
By Isla Binnie
(Reuters) — California's new emissions laws could force companies to reveal more about their carbon footprint to the U.S. Securities and Exchange Commission (SEC), raising the risk of legal challenges to their climate claims, regulatory lawyers say.
California Governor Gavin Newsom signed rules into law this month requiring companies that are active in the state and generate revenue of more than $1 billion annually to publish an extensive account of their carbon emissions starting in 2026.
The SEC has drafted its own rules which would not go as far, giving companies discretion over disclosing some emissions they deem not material or not pertaining to their emission reduction targets.
The SEC's rules would apply to all U.S.-listed companies, and one of the politicians behind the California law estimates that about 1,400 of those would also meet the threshold to report in the state.
The overlap could result in companies including emission information in SEC filings that they would have held back were it not for California's rules, the regulatory lawyers and experts said. They added that this may expose companies to more SEC and shareholder scrutiny.
«Increased disclosure typically comes with increased liability risk and compliance efforts,» Kirkland & Ellis regulatory lawyer Abbey Raish said.
Newsom's office declined to comment. An SEC spokesperson also declined to comment on California's rules raising the legal risk, but pointed to comments by the agency's Chair Gary Gensler to U.S. lawmakers last month on companies spending less to comply with SEC rules if they already report in California.
It would not be the first time that climate-related legislation originating in California has a broader impact.
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