Tyler Welti was recently quoted in Bloomberg on a federal court challenge to California’s new climate disclosure laws. The following is an excerpt:
SB 261 is one of two laws California passed in 2023 aimed at filling what the state sees as gaps in federal securities laws over climate-related disclosures.
Its companion, SB 253, requires companies with more than $1 billion in annual revenue to start reporting their greenhouse gas emissions as soon as June 2026.
The US Chamber and other business groups argue the statutes violate several constitutional provisions, including the supremacy and interstate commerce clauses as well as the First Amendment.
After whittling down the case to the argument that climate disclosure requirements act as government compelled speech, a federal judge in California allowed both laws to remain in effect while litigation over their constitutionality plays out.
California’s interest “in providing reliable information” survives First Amendment scrutiny, and the plaintiffs aren’t likely to win on the merits or face irreparable harm if SB 261 went into effect in the interim, he said.
California’s interest “in providing reliable information” survives First Amendment scrutiny, and the plaintiffs aren’t likely to win on the merits or face irreparable harm if SB 261 went into effect in the interim, he said.
The Ninth Circuit’s pause of SB 261’s enforcement could have been a signal that conversely, the temporary move wouldn’t significantly harm the state’s interest in providing investors more climate transparency, said Tyler Welti, a partner at Venable LLP.
But without that court-ordered pause, businesses’ asserted harm from “making that speech on what they say is a controversial topic would have been already felt” by the time the court ruled on the merits, he said.
Also playing into the mix: The California Air Resources Board has yet to finalize the disclosure parameters for SB 261, leaving businesses unclear about what they are and aren’t required to report.
“Companies will need to stay nimble and adapt to any changes from the existing guidance that are made when CARB issues the actual final rules,” Welti said.
For the full article, click here.