Executive Vice President, Center for Capital Markets Competitiveness (CCMC), U.S. Chamber of Commerce
Executive Vice President, Center for Technology Engagement (C_TEC), U.S. Chamber of Commerce
Executive Vice President, Global Innovation Policy Center (GIPC), U.S. Chamber of Commerce
Senior Advisor to the President and CEO, U.S. Chamber of Commerce
January 30, 2024
The U.S. Chamber is firm in our belief that climate change poses a significant risk to the long-term stability and prosperity of the United States, and we are committed to addressing these risks through principled, market-based approaches to reduce greenhouse gas emissions.
Today, many American public companies disclose material climate-related risks. However, California’s new climate disclosure laws, Senate Bills 253 and 261, are a step backward from the goal of providing digestible and decision-useful climate information to investors.
In October 2023, California Governor Gavin Newsom signed the two bills into law, enacting new climate disclosure requirements for public and private companies that ‘do business’ in California. With the flick of a pen, Governor Newsom has imposed billions of dollars of new costs and compliance burdens on businesses of all sizes, especially Main Street businesses. These laws are a boon to the trial bar, which will enrich itself through frivolous and harmful litigation. Furthermore, California has usurped the role of federal regulators while violating the First Amendment rights of businesses.
That is why the U.S. Chamber of Commerce, along with other business and agricultural associations, is suing to stop the California laws from moving forward.
Because of California’s actions, the U.S. is now on the precipice of seeing individual states weaponize environmental regulations and corporate disclosure laws against one another, with companies and investors stuck in the middle. Other liberal-leaning states will likely follow California’s lead by enacting similar disclosure laws, while conservative-leaning states, such as Texas or West Virginia, may soon do the opposite, imposing liability on companies that adhere to California’s disclosure laws.
A patchwork of state laws in this fashion risks placing U.S. companies in a “Catch-22” scenario in which adherence to one state law places them in violation of another. Competing and contradictory policies leave businesses that have been doing the right thing in an impossible position.
The courts have weighed in on a similar dilemma. In 2010, Congress passed a law requiring companies to disclose resource extraction payments. Because this disclosure would have forced businesses to break the law in other jurisdictions, the initial SEC rule implementing the provision was thrown out.
A state-by-state framework of voluminous, contradictory disclosures will surround investors with an avalanche of noise, making it more difficult to make investment decisions due to a lack of clarity. In cold recognition of this reality, even the proponents of the California laws have urged other states not to follow California’s lead, expressing concern that a patchwork of disclosure rules could do more harm than good by increasing the cost and complexity of compliance.
Sacramento is not the nation's federal regulator. Many of America’s businesses are already disclosing climate risk, and businesses are at the forefront of developing and deploying technologies to clean the environment. Let us give them the opportunity to do what they do best by avoiding regulatory fragmentation.
About the authors
Tom Quaadman develops and executes strategic policies to implement a global corporate financial reporting system, address ongoing attempts of minority shareholder abuse of the proxy system, communicate the benefits of efficient American capital markets, and promote an innovation economy and the long-term interests of all investors.