BILL NUMBER: SB 1550	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Florez

                        FEBRUARY 22, 2008

   An act to add Section 318.2 to the Corporations Code, relating to
corporations.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1550, as introduced, Florez. Corporations: climate change
disclosure.
   Existing law, the General Corporation Law, governs the operation
of corporations. Under existing law, the board of directors of a
corporation is required to send the shareholders of the corporation,
at the close of the fiscal year, an annual report containing, among
other things, a balance sheet, an income statement, and a statement
of cashflows for that fiscal year.
   This bill would require the Secretary of State, in consultation
with the investment community, to develop a climate change disclosure
standard for use by listed companies doing business in California.
The standard would provide guidance on disclosure of climate change
risks and opportunities for listed companies. The bill would require
the Secretary of State to publish the standard on its Internet Web
site by December 1, 2008, and would authorize the Secretary of State
to periodically revise the standard, as specified. The bill would
state findings and declarations in this regard.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares the following:
   (a) Climate change presents new corporate governance, regulatory,
and reputational risk to publicly held companies, which has led
various important Wall Street analysts to study the effects of
climate change on shareholder value.
   (b) Institutional investors have begun pressing corporations for
more disclosure of climate risk and opportunities, including the
impact of climate change on competitiveness and investment returns.
   (c) A 2005 opinion published by Freshfields, an internationally
recognized corporate law firm, clearly stated that investors have a
fiduciary duty to examine all reasonably foreseen risks associated
with investment opportunities, including externalities, such as
climate change, which could have a material impact on the performance
of a publicly held company.
   (d) Institutional investors representing over $7 trillion in
assets have proposed global standards for disclosing carbon and other
greenhouse gas emissions. Increased disclosure of the risk
associated with climate change provides a more transparent and
therefore more efficient marketplace for investors, especially large
institutional investors.
  SEC. 2.  Section 318.2 is added to the Corporations Code, to read:
   318.2.  (a) The Secretary of State, in consultation with the
investment community, shall develop an investor-based climate change
disclosure standard in accordance with subdivision (f) for use by
listed companies doing business in California. The standard shall
provide guidance on disclosure of climate change risks and
opportunities for listed companies. No listed company is required to
meet the standard.
   (b) To the greatest extent possible, the Secretary of State shall
use globally accepted climate change disclosure standards.
   (c) The Secretary of State shall complete and publish the
investor-based climate change disclosure standard on its Internet Web
site by December 1, 2008. The standard may be revised periodically
in order to meet investor needs as well as to incorporate new
understandings of the risks and opportunities of climate change.

   (d) Listed companies are encouraged to use existing disclosure
mechanisms to provide information that meets investors' expectations
and serve their analytical needs. Existing disclosure mechanisms
include, but are not limited to, financial statements, filings with
the United States Securities Exchange Commission, annual reports, and
sustainability reports.
   (e) The climate change disclosure standard shall, at a minimum,
address and include the following:
   (1) Emissions: A statement of the company's total greenhouse gas
emissions including actual historical direct and indirect emissions
since 1990, current direct and indirect emissions, and estimated
future direct and indirect emissions of greenhouse gases from its
operations, purchased electricity, and products and services.
   (2) Climate Change Statement: A statement of the company's current
position on climate change, its responsibility to address climate
change, and its engagement with governments and advocacy
organizations to effect climate change policy.
   (3) Emissions Management: An explanation of all significant
actions the company is taking to minimize its risk and maximize its
opportunities associated with climate change. Specifically, this
explanation should include the actions the company is taking to
reduce, offset, or limit greenhouse gas emissions. Actions could
include establishment of emissions reduction targets, participation
in emissions trading schemes, investment in clean energy
technologies, and development and design of new products.
Descriptions of greenhouse gas reduction activities and mitigation
projects should include estimated emission reductions and timelines.
   (4) Corporate Governance: A description of the company's corporate
governance actions, including whether the board and executive staff
have been engaged on climate change and addressing climate risk. In
addition, a company should disclose whether executive compensation is
linked to meeting corporate climate objectives, and if so, a
description of how they are linked.
   (5) Assessment of Physical Risks: Climate change is beginning to
cause an array of physical effects, many of which can have
significant implications for public companies and their investors. To
help investors analyze these risks, a company should analyze and
disclose material, physical effects that climate change may have on
the company's business and its operations, including its supply
chain. Specifically, a company should disclose how climate and
weather generally affect its business and its operations, including
its supply chain. These effects may include the impact of changed
weather patterns, such as increased number and intensity of storms,
sea-level rise, water availability and other hydrological effects,
changes in temperature, and impacts of health effects, such as
heat-related illness or disease, on its workforce. After identifying
these risk exposures, a company should describe how it could adapt to
the physical risks of climate change and estimate the potential
costs of adaptation.
   (6) Analysis of Regulatory Risks: As more governments adopt
regulatory standards relating to greenhouse gas emissions, companies
with direct or indirect emissions may face regulatory risks that
could have significant implications. Investors need to understand
these risks and to assess the potential financial impacts of climate
change regulations on the company. Specifically, a company should
disclose any known trends, events, demands, commitments, and
uncertainties stemming from climate change that are reasonably likely
to have a material effect on its financial condition or operating
performance. This analysis should include consideration of secondary
effects of regulation such as increased energy and transportation
costs. The analysis should incorporate the possibility that consumer
demand may shift sharply due to changes in domestic and international
energy markets. A company should disclose all greenhouse gas
regulations that have been imposed in countries where the company
operates and an assessment of the potential financial impact of those
regulations. The company should disclose expectations concerning the
future cost of carbon resulting from emissions reductions of 5, 10,
and 20 percent below 2000 year levels by the year 2015.
Alternatively, a company could analyze and quantify the effect on the
firm and shareholder value of a limited number of plausible
greenhouse gas regulatory scenarios. These scenarios should include
plausible greenhouse gas regulations that are under discussion by
governments in countries where the company operates. A company should
use the approach that provides the most meaningful disclosure, while
also applying, where possible, a common analytic framework in order
to facilitate comparative analyses across companies. A company should
clearly state the methods and assumptions used in its analyses for
either alternative.