9th Cir. Strikes Down Portions of California Climate Disclosure Laws

Yesterday, the 9th Circuit issued its long-awaited decision on challenges to California’s climate disclosure requirements under SB 251 and 253.  To make a long story short, SB 261’s climate-related financial risk and SB 253’s Scope 3 GHG disclosure requirements didn’t pass muster, but the Court upheld  SB 253’s Scope 1 and Scope 2 reporting requirements. This excerpt from Bass Berry’s blog on the case summarizes the key aspects of the decision:

– SB 253 – Scope 1 and Scope 2 GHG Emissions Disclosures: With respect to Scope 1 and Scope 2 reporting, the court found that these requirements involve factual disclosures sufficiently connected to a company’s operations and capital-market transactions to constitute commercial speech. Applying intermediate scrutiny, the court affirmed the denial of preliminary injunctive relief, allowing these requirements to proceed.  Therefore, in-scope companies continue to remain subject to the November 10, 2026 deadline to submit Scope 1 and 2 emissions to the California Air Resources Board (CARB).

 

– SB 253 – Scope 3 GHG Emissions Disclosures: The court concluded that Scope 3 reporting requirements, which concern indirect emissions throughout a company’s value chain, including suppliers and customers, constitute noncommercial speech subject to strict scrutiny. The court found that these requirements are likely unconstitutional because they are not sufficiently tailored to California’s asserted interests.

 

– SB 261 – Climate-Related Financial Risk Disclosures: The court concluded that SB 261 compels noncommercial speech by requiring companies to make subjective, predictive and normative judgments about climate-related financial risks. Applying strict scrutiny, the court found that the requirements were not sufficiently narrowly tailored to California’s asserted interests and that preliminary injunctive relief was warranted.