BILL NUMBER: SB 1550 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JULY 2, 2008
AMENDED IN SENATE APRIL 24, 2008
AMENDED IN SENATE APRIL 21, 2008
INTRODUCED BY Senator Florez
( Principal coauthors:
Assembly Members Arambula and Caballero
)
FEBRUARY 22, 2008
An act to add Section 318.2 to the Corporations Code, relating to
corporations.
LEGISLATIVE COUNSEL'S DIGEST
SB 1550, as amended, 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 Controller, in consultation with the
investment community, to develop a climate change disclosure standard
for use by listed companies corporations, as
defined, doing business in California. The standard would
provide guidance on disclosure of climate change risks and
opportunities for listed companies
corporations . The bill would require the Controller to
consult with the State Air Resources Board on the development of the
disclosure standard relating to emissions to ensure consistency with
other related provisions. The bill would require the Controller
to publish the standard on its Internet Web site by December 1,
2009, and would authorize the Controller 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
corporations , 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 corporation
.
(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 Controller, in consultation with the investment
community, shall develop an investor-based climate change disclosure
standard in accordance with subdivision (e) for use by listed
companies corporations, as defined in
subdivision (d) of Section 301.5, doing business in California.
The standard shall provide guidance on disclosure of climate change
risks and opportunities for listed companies. No listed
company corporations. No listed corporation is
required to meet the standard.
(b) To the greatest extent possible, the Controller shall use
globally accepted climate change disclosure standards.
(c) The Controller shall complete develop
and publish the investor-based climate change disclosure
standard on its Internet Web site by December 1, 2009. The standard
may be revised by the Controller periodically in order to meet
investor needs as well as to incorporate new understandings of the
risks and opportunities of climate change. The Controller shall
consult with the State Air Resources Board on the development of the
statement described in paragraph (1) of subdivision (e) to
ensure consistency with Section 38530 of the Health and Safety Code.
(d) Listed companies (1)
Listed corporations 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.
(2) A listed corporation that chooses to use the investor-based
climate change disclosure standard shall electronically submit
documentation pursuant to subdivision (e) to the Controller. Upon
receipt of this documentation, the Controller shall post the
documentation on its Internet Web site. A listed corporation may
provide direct Internet Web site links to existing disclosure
mechanisms to the extent that the information in that mechanism is
consistent with the disclosure standard described in subdivision (e).
(e) The climate change disclosure standard shall, at a minimum,
address and include the following:
(1) Emissions: A statement of the company's
corporation'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 corporation'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 corporation is
taking to minimize its risk and maximize its opportunities associated
with climate change. Specifically, this explanation should include
the actions the company corporation 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
corporation'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 corporation 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
corporations and their investors. To help investors analyze
these risks, a company corporation
should analyze and disclose material, physical effects that climate
change may have on the company's corporation'
s business and its operations, including its supply chain.
Specifically, a company corporation
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
corporation 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 corporations 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 corporation . Specifically, a
company corporation 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 corporation should
disclose all greenhouse gas regulations that have been imposed in
countries where the company corporation
operates and an assessment of the potential financial impact of
those regulations. The company corporation
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 corporation 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 corporation operates. A
corporation 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 corporations. A
corporation should clearly state the methods and assumptions
used in its analyses for either alternative.