Joint Comments to Honorable Scott Wiener on Climate Corporate Data Accountability Act

The Honorable Scott Wiener
Member, California State Senate
1021 O St., Ste 8620

We are writing to express concern regarding the inclusion of financed emissions, particularly Scope 3 financed emissions, in the disclosure requirements contemplated in SB 253, the Climate Corporate Data Accountability Act, as well as to highlight the high potential for conflict between the bill and climate disclosure regimes currently pending at the federal and international level. As currently drafted, SB 253 creates a corporate disclosure regime designed to provide emissions information to the general public. The bill would require U.S. companies doing business in California to disclose annually audited amounts of Scope 1, 2, and 3 greenhouse gas emissions (GHGs) in accordance with the Greenhouse Gas Protocol (GHG Protocol). We are concerned that the inclusion of financed emissions data is counterproductive to the stated goals of the legislation. For emissions information to be useful to the public and actionable to policymakers, it must be clear, consistent, and easy to interpret. The information reported from the disclosure of Scope 3 financed emissions will not meet that standard without agreed-upon methodologies for calculating emissions.

Under SB 253, companies would be required to measure not only the GHGs of their own operations (included within classifications known as "Scope 1" and "Scope 2") but also GHGs that result from the "value chains" of their products and services ("Scope 3"). Scope 3 GHGs measure emissions from suppliers and customers, including those emissions generated by how individual consumers obtain, use, and dispose of their products. Scope 3 guidance also measures "financed emissions" of certain companies through their investment and lending activities. Reported GHGs of banking institutions would therefore include not only the Scope 1, 2, and 3 GHGs of their own operations but also a portion of Scope 1, 2, and 3 emissions of each borrower or company in their loan portfolios.

Banks and other financial services institutions are uniquely positioned as intermediaries in our economy – financing everything from the corner store to the city government to the multi-national corporation. Consequently, requiring banks to calculate and report their "financed emissions" would sweep in a tremendous amount of duplicative information. The GHG Protocol acknowledges that significant double counting will occur based on where the borrower exists within a value chain – be it a supplier, a customer, or the ultimate consumer. While SB 253 proposes to limit the disclosure requirement to reporting entities with more than $1 billion in annual revenue, bank customers could find it costly and challenging to supply detailed and reliable value chain information to their lenders, especially without an accepted standardized calculation methodology. In addition to large corporations, information from consumers, small businesses, municipal entities, and federal agencies will be needed. Without a standardized calculation methodology, reporting will depend primarily on untimely, inconsistent, and unreliable practices and estimates from this diverse set of entities.

Download the joint comment letter to read the full text.