This February post noted the introduction of SB 261 which aimed at imposing climate-related financial risk reporting.  In the ensuing months, the bill was amended seven times and garnered numerous supporters and opponents.  On Saturday, Governor Newsom signed the bill into law.  As enacted, the bill applies to corporations, partnerships, limited liability companies, and other business entities that:

• was formed under the laws of the state, the laws of any other state of the United States or the District of Columbia, or under an act of the Congress of the United States;
• has total annual revenues in excess of $500,000,000; and
• does business in California.

The new requirement will not apply to business entities subject to regulation by the California Department of Insurance in California, or that is in the business of insurance in any other state.  

Covered entities will be required by January 1, 2026, and biennially thereafter, a covered entity shall prepare a climate-related financial risk report disclosing both of the following:

• its climate-related financial risk, in accordance with the recommended framework and disclosures contained in the Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures (June 2017) published by the Task Force on Climate-related Financial Disclosures, or any successor thereto, or pursuant to an equivalent reporting requirement as described in the bill; and
• its measures adopted to reduce and adapt to climate-related financial risk disclosed in its report. 

Covered entities will be required to make the report available on their own websites.

As I noted in my initial post, SB 261 oddly will not apply to entities formed under the laws of other countries.  It also fails to define what it means to do business in California.  

SB 261 quite obviously compels speech by the entities that it purports to cover.   Accordingly, the question exists as to whether it violates the First Amendment of the United States Constitution.  Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S. 47, 61 (2006) ("Some of this Court's leading First Amendment precedents have established the principle that freedom of speech prohibits the government from telling people what they must say.").  Notably, SB 261 does not involve voluntary commercial advertising.  Rather, it requires disclosure in the absence of any other disclosures by the covered entities.    For an interesting analysis of the constitutionality of mandated ESG disclosure by the Securities and Exchange Commission, see this post by Professor Sean Griffith.