Banks and their larger clients have narrowly dodged new climate disclosure requirements after a California proposal stalled at the end of the legislative session last week.
The bill would have required companies that do business in California and have more than $1 billion in revenues to report their own greenhouse gas emissions as well as those of their suppliers. It failed to pass the state Assembly, even as lawmakers
Though the bill has gotten pushback from some industry groups, its co-author said he will likely reintroduce it next year, and supporters hope other states consider similar measures. The bill was similar to the Securities and Exchange Commission's
Democratic state Sen. Scott Wiener, who co-authored the bill, called the legislation an "anti-greenwashing" measure that lets consumers compare companies' environmental footprints. The bill would give the public data on whether companies that are "marketing themselves as green" can back up those claims, Wiener said.
"They're fighting it not because it's burdensome, but because they don't want the public to have this information," Wiener said of the corporate pushback.
Critics of the measure included banking trade groups such as the Bank Policy Institute and the California Bankers Association, both of which referred American Banker to
The California bill presented a "significant risk of inconsistency and conflict" with the SEC's pending rules, according to the trade groups' letter. The groups also wrote that the bill could "sweep in a tremendous amount of duplicative information" because banks would have to report their own emissions as well as those of some of their clients, which may themselves be already reporting that data.
"Because agreed-upon methodologies do not yet exist, accurate and actionable public reporting will be difficult and expensive," the groups wrote in the letter, which was also signed by the American Bankers Association and the Securities Industry and Financial Markets Association.
State Sen. Brian Jones, a Republican, argued that the bill would hurt small and midsize businesses even if they aren't required to report emissions themselves. To comply with the legislation's requirements, bigger companies would make all of the firms in their supply chains, including smaller firms, tally their own emissions, he said.
"These smaller businesses will bear the brunt of additional costs, which could easily lead them to become uncompetitive with other larger competitor businesses," Jones said in a written statement.
Banking trade groups have also
After the Supreme Court struck down an Environmental Protection Agency rule, legal observers are wondering how far the justices will go to rein in the authority of financial regulators. A Securities and Exchange Commission proposal on climate risk disclosures could become a test case.
Though the SEC is undertaking a similar effort, Wiener argued that California needs its own emissions reporting because the state proposal includes private companies. He also raised the possibility that critics may seek to block the federal rule by suing the SEC, or a scenario in which a future Republican-led agency waters it down.
Other state legislatures should consider measures that are similar to California's because the risks of climate change on the economy are so large, said Steven Rothstein, managing director of the climate group Ceres' Accelerator for Sustainable Capital Markets.
He pointed, for example, to actions that
"Climate risks for all businesses, including banks, is a significant issue and getting more serious every day, as we look at floods, fires and tornadoes and droughts," Rothstein said. "So we all have to work on this together."
Jordan Stutts contributed to this report.
