A federal appeals court in San Francisco has partially blocked enforcement of California laws requiring large companies to disclose information about climate-related financial risks and indirect greenhouse gas emissions. On Monday, a three-judge panel of the 9th U.S. Circuit Court of Appeals sided in part with business groups that had challenged the regulations as unconstitutional. The court will at the same time allow the state to continue requiring companies to report greenhouse gas emissions that arise directly from their operations or from the energy they purchase.
The dispute concerns two laws signed in 2023 by Gov. Gavin Newsom. The first, the Climate-Related Financial Risk Act, known as SB 261, requires companies with more than $500 million in annual revenue to report every two years on financial risks stemming from climate change.
The second, the Climate Corporate Data Accountability Act (SB 253), applies to companies with revenue exceeding $1 billion a year and provides for annual reporting of greenhouse gas emissions. Its requirements cover both companies’ own emissions and indirect emissions, including those generated by their suppliers and customers.
The judges found that some of the provisions likely violate the First Amendment to the U.S. Constitution. With regard to SB 261, the court unanimously concluded that the requirement to publish climate risk assessments may force companies to take evaluative positions on a politically sensitive issue, rather than provide only factual information. The panel also found that requiring disclosure of emissions across the entire value chain under SB 253 goes too far in relation to the state’s stated goals, such as protecting investors, reducing emissions and countering misleading information.
The judges noted that California could use less restrictive approaches, for example publishing data that is already available or encouraging companies to disclose emissions voluntarily.
“Climate change will increasingly affect human activity in the coming years […]. But the First Amendment limits the government’s ability to compel speech,” Judge Jacqueline Nguyen wrote in the opinion.
The case will now return to federal Judge Otis Wright in Los Angeles, who had previously allowed California to enforce both laws.
Editor: JŁ
