Key Topics
- California’s Climate Disclosure Laws remain poised to take effect January 1, 2026.
- U.S. District Court Rejects First Amendment challenge to the Laws.
- CARB Presses Forward with related workshops and regulations.
- Glass Lewis launches annual, informal survey to inform the firm’s 2026 proxy voting guidance.
The Details
In the ongoing legal challenge to California’s climate-disclosure statutes (SB 253 and SB 261, discussed here by Akin), the U.S. District Court for the Central District of California recently issued an Order on August 13 that denied plaintiffs’ motion for a preliminary injunction. That motion was filed by the U.S. Chamber of Commerce and other business and farming groups arguing the statutes violated their First Amendment rights. The Court found that the plaintiffs were unlikely to succeed on the merits of their claims.
- SB 253 (the Climate Corporate Data Accountability Act and codified at California Health and Safety Code §38532) and SB 261 (the Climate-Related Financial Risk Act and codified California Health and Safety Code §38533) require scoped-in companies to publicly disclose Scope 1, 2 and 3 greenhouse gas (GHG) emissions and those with over $500 million in annual revenue to report on climate-related financial risk and any measures adopted to mitigate those risks.
- The Order noted SB 253 “merely requires companies to report data on emissions,” and “does not require companies to say whether they are ‘responsible’ for those emissions or advocate for any (and no) policy response to climate change.”
- Although the preliminary injunction was denied, unless resolved otherwise, the First Amendment claims will proceed to trial a little over a year from now. Earlier this year, in a separate Order, the Court dismissed plaintiffs’ other Constitutional challenges.
Relatedly, the California Air Resources Board (“CARB”) convened its second public workshop on August 21 to provide additional implementation guidance on the climate-disclosure statutes, with stated plans to finalize regulations later this year. During the most recent workshop, CARB staff discussed their ongoing work refining foundational definitions that will be critical to determining which entities are subject to the State’s reporting obligations.
- In response to feedback following its May workshop—where CARB personnel initially suggested defining revenue as “gross receipts” under California Revenue and Taxation Code §25120(f)(2), a concept many commenters found overly expansive—CARB is now proposing a new definition: “[R]evenue is the total global amount of money or sales a company receives from its business activities, such as selling products or providing services,” without deductions for operating costs or other expenses.
- With respect to the defining what constitutes “doing business in California,” CARB has streamlined its proposed test to apply to companies (i) that are organized or domiciled in the state and (ii) with sales in California exceeding an inflation adjusted threshold of $735,019. Previously, CARB’s proposed definition included additional tests that were determined to be unnecessary.
- While CARB continues to consider which entities may be exempted from complying with the statutes, it has clarified that non-profits, government entities and companies whose only business in California is the presence of teleworking employees will be exempted from complying with the statutes.
- The agency additionally outlined a draft timeline moving forward, with public comments regarding the content of the workshop are due before September 11, 2025. CARB intends to issue a Notice of Proposed Rulemaking on or about October 14, 2025, with public comments open between October 17-November 30, 2025. CARB’s Board is scheduled to take up the proposed rulemaking on December 11-12, 2025.
Glass Lewis has launched its annual, informal process for obtaining market feedback regarding its proxy voting policies for the 2026 proxy season. This follows on the heels of Institutional Shareholder Services (ISS) recently launching its own annual policy survey. Glass Lewis has asked participants to submit feedback by September 15, 2025. The survey seeks feedback on a variety of topics, including:
- Board Oversight and Performance: Board diversity, director performance and whether share ownership thresholds should be adopted as a condition to submitting shareholder proposals or filing derivative actions without shareholder approval.
- Compensation: Non-executive directors’ fees, security costs for executives, time-based incentive awards and whether certain compensation metrics should continue to be required if the U.S. Securities and Exchange Commission (SEC) scales back disclosure requirements.
- ESG: Reactions to anti-environmental, social and governance (ESG) sentiment in the U.S. and say on climate proposals.
- Shareholder Rights: Approaches to reincorporation proposals and virtual-only shareholder meetings.
- General: Benchmarks relating to artificial intelligence (AI) matters, basing voting decisions on financial factors rather than corporate governance “best practices” and shareholder engagement practices in light of recent updates to the C&DIs covering Regulation 13D and 13G.
As is customary, Glass Lewis is expected to publish its final voting guidance for the 2026 proxy season later this year.
To read the full newsletter for a comprehensive overview of other recent sustainability policy and regulatory developments and their implications, please click here.
