March 8, 2025

Submitted electronically via https://ww2.arb.ca.gov/
Rajinder Sahota
Deputy Executive Officer for Climate Change and Research
California Air Resources Board
1001 I Street,
Sacramento, CA 95814

Re: Information Solicitation to Inform Implementation of California Climate-Disclosure Legislation: Senate Bills 253 and 261, as amended by SB 219

Dear Deputy Executive Officer Sahota:

The Securities Industry and Financial Markets Association (“SIFMA”)¹ appreciates the opportunity to respond to the California Air Resources Board’s (“CARB”) information solicitation (the “Information Solicitation”) to inform the implementation of the Climate Corporate Data Accountability Act (“SB 253”) and the Greenhouse gases: climate-related financial risk (“SB 261”), each as amended by the Greenhouse gases: climate corporate accountability: climate-related financial risk Act (“SB 219”).

Many SIFMA members have been working to implement new climate disclosure regulation now required or under development by regulators and governmental authorities across the globe. Additionally, many firms have been voluntarily disclosing greenhouse gas (“GHG”) emissions and information regarding climate-related financial risks for some time, often based upon international voluntary frameworks and standards developed by non-governmental entities to inform voluntary disclosure practices, such as the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”), the Greenhouse Gas Protocol (the “GHG Protocol”), the Sustainability Accounting Standards Board standards, the World Economic Forum Stakeholder Capitalism Metrics and the Global Reporting Initiative standards.

Our members may also consider financially material climate-related information disclosed by others when making investment and other business decisions. As such, SIFMA is well positioned to provide views as to how regulations adopted by CARB can elicit reliable and useful information for users while limiting the burden imposed on reporting companies. Toward that end, we have provided below a brief discussion of key principles that should inform CARB’s approach to regulation under SB 253 and SB 261, followed by specific responses to select questions included in the Information Solicitation.

Key principles

To comply with its statutory mandate and tailor its regulations to elicit reliable and useful information, SIFMA recommends that CARB’s approach to implementation of SB 253 and SB 261 be guided by the following key principles.

• As mandated by SB 253 and SB 261, CARB should rely on existing reporting frameworks rather than developing its own reporting standard either from a blank page or through modifying those existing standards.
  • Reliance on existing, well-established standards. SB 253 and SB 261 each mandate disclosure be made in accordance with existing, well-established and widely recognized disclosure frameworks. SB 253 refers specifically to the GHG Protocol and SB 261 refers to TCFD and reporting standards adopted by the International Sustainability Standards Board (“ISSB Standards”). In each case, those standards have been developed over a long period of time with significant input from both producers and users of disclosure and are well understood by a large number of relevant stakeholders. Many SIFMA members and any number of other companies prepare or have begun preparing to provide disclosure in accordance with those frameworks.

“Standardizing” those disclosure frameworks by revising them, including by removing provisions intended to allow reporting companies to make decisions as to the information and presentation relevant to their particular circumstances,² would amount to CARB developing its own new disclosure standards.² None of SB 253, SB 261 or SB 219 empower CARB to develop its own reporting standards. Rather, each requires that reporting be prepared in accordance with existing standards.

Further, requiring companies to begin developing disclosure for a new, California-specific standard would substantially increase the costs of compliance and require significant duplication of efforts as companies would be forced to establish overlapping, but not identical data gathering efforts and controls to comply with different requirements. It would also require many companies to work through separate assurance engagements for CARB-mandated disclosures and disclosures prepared in accordance with existing standards, again increasing compliance costs. Finally, it would result in companies producing disclosure on, for example, their greenhouse gas emissions for California-specific reporting that would be different from their disclosure on the same topics prepared in accordance with the GHG Protocol, TCFD, ISSB Standards or other established frameworks because the rules adopted by CARB would be out of sync with those recognized frameworks. A single company publishing multiple reports on the same topics with different information will lead to confusion
among users of that information rather than useful disclosure.

• • Evolution of third-party frameworks over time. As CARB notes in Question 3.a of the Information Solicitation, the GHG Protocol and other disclosure frameworks have and are expected to continue to evolve over time. To the extent the GHG Protocol is updated, CARB should permit companies to elect to report under the newer standards (which may be necessary in order to allow companies to adopt emerging best practices and avoid duplicative reporting) or to continue to report under the framework in effect at the time SB 253 was adopted (which may be necessary to avoid imposing new, onerous burdens on companies without any consideration of those standards by CARB or a notice and comment rulemaking process). Companies should not be required to report under any new iteration of the GHG Protocol absent a future rulemaking by CARB (or legislation) to that effect. To provide companies with sufficient time to prepare for any changes to the GHG Protocol, any new rulemaking by CARB should not be effective until at least the second reporting year after it is adopted.
• CARB should clarify that companies may utilize reporting prepared under regulatory regimes adopted by other jurisdictions that address Scope 1, Scope 2 and (beginning in 2027) Scope 3 greenhouse gas emissions and climate-related financial risks to satisfy requirements under SB 253 and SB 261. Each of SB 253 and SB 261 includes provisions intended to limit duplication of effort and costs by allowing companies to utilize disclosure included in reports prepared to comply with requirements in other jurisdictions. CARB should clarify that information produced in accordance with mandatory disclosure requirements in other jurisdictions that require disclosure of Scope 1, Scope 2 and (beginning in 2027) Scope 3 greenhouse gas emissions will satisfy the requirements of SB 253, including in cases where those mandatory requirements may differ in some respects from the GHG Protocol. Similarly, CARB should clarify that climate-related financial risk disclosure prepared in accordance with mandatory disclosure requirements in other jurisdictions will satisfy the requirements of SB 261, including in cases where requirements are based on the TCFD or ISSB Standards but include some modifications to those standards. Otherwise, companies will be forced to produce California-specific disclosure that addresses the same topics as disclosure produced to comply with requirements in other jurisdictions but uses a different reporting framework mandated by California. As discussed above, that will result in substantially increased costs, duplication of efforts, multiple assurance engagements in different jurisdictions and confusion among users of the information.

Consistent with the above approach, to avoid imposing unnecessary costs on reporting companies CARB should not adopt prescriptive requirements as to the form of disclosure required to satisfy the requirements of SB 253 and SB 261. Reporting companies should not be required to restate, data tag or otherwise reformat reports in order to satisfy SB 253 or SB 261, provided that the reports include the necessary substantive information. To the extent companies are required to submit reports under SB 253 (SB 261 only contemplates reports being posted on the website of the reporting company and does not contemplate companies submitting reports to any party), such reports should only be required to be submitted to a repository maintained by CARB.

Additionally, to mitigate the need to reproduce disclosure published elsewhere, companies should be permitted to incorporate by reference part or all of the information required under SB 253 and SB 261 from other publicly available materials by directing the reader to those materials.

1. SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate on legislation, regulation, and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org. SIFMA appreciates the assistance of Michael Littenberg and Marc Rotter of Ropes & Gray LLP in the preparation of this response. [↩]
2. See, e.g., Section 6.3 of the Corporate Value Chain (Scope 3) Accounting and Reporting Standard Supplement to the GHG Protocol Corporate Accounting and Reporting Standard, available at: https://ghgprotocol.org/sites/default/files/standards/Corporate-Value-Chain-Accounting-Reporing-Standard_041613_2.pdf. [↩] [↩]