California should take steps to ease the burden for financial institutions to comply with a new state law that requires them to report their greenhouse gas emissions, including those emissions for which they are not directly responsible, the American Bankers Association, California Bankers Association and California Credit Union League said in a joint letter last week.
The Climate Corporate Data Accountability Act will require businesses with annual revenues of more than $1 billion to report their direct and indirect emissions to the state every year. The state legislature passed the bill last month and Gov. Gavin Newsom has signaled his intention to sign it into law, although he has suggested he is willing to “clean up” the legislation.
In their letter, the associations urged Newsom to veto the bill, noting that banks may need as long as two years to comply with the law, and that the information gathered is likely to be inconsistent and unreliable, given that there are no nationally recognized standards for the reporting required. Short of a veto, the groups had several suggestions to mitigate the law’s more burdensome reporting requirements, particularly for “scope 3” financed emissions that are generated by borrowers in a bank’s lending portfolio, as well as their business partners and customers.
Among their suggestions, the associations said the state should expand or clarify proposed “safe harbor” language for emissions reporting so companies that do not have effective internal controls over emissions accounting systems may be considered to have made estimates in good faith. They also urged that California’s requirements align with, or be compatible with, federal standards or other international standards incorporated by U.S. authorities.