Bills have been reintroduced in the New York State Senate calling for greenhouse gas emissions and climate risk disclosures. Similar bills were introduced last session. The key provisions of the new bills are described in this article. 

The bills are generally aligned with the climate disclosure laws adopted in California in late 2023. Those laws are further discussed in Complying with California Climate Disclosure legislation in 12 steps.

Climate Corporate Data Accountability Act

On January 27, Senate Bill 3456 calling for the adoption of the Climate Corporate Data Accountability Act was introduced in the New York Senate. The bill was introduced by Senator Hoylman-Sigal, a Senator from the West Side of Manhattan. Senator Hoylman-Sigal introduced a similar bill last session.

Reporting entities

An entity would have to report if it meets three requirements:

• it is formed under US law;
• it does business in New York and derives receipts from activity in New York within the meaning of section 209 of the New York Tax Law; and
• its total revenues exceeded $1 billion in the preceding fiscal year, including but not limited to revenues received by all of its subsidiaries doing business in New York.

If a reporting entity is a consolidated subsidiary of an ultimate parent entity, the ultimate parent entity may instead report.

An entity incorporated outside New York would not be considered to be doing business in New York if it is only engaging in New York in maintaining or defending an action or proceeding, holding meetings of its directors or shareholders, maintaining bank accounts or maintaining offices or agencies solely for the transfer, exchange and registration of its securities, or appointing and maintaining trustees or depositaries with relation to its securities.

Disclosure requirement

Reporting entities would be required to annually disclose scope 1, 2 and 3 greenhouse gas emissions. Scope 1 and 2 emissions data would first be required in 2027 for the prior fiscal year. Scope 3 emissions data would first be required to be reported the following year.

Under the Act, reporting would be required to be structured to minimize duplication of effort and allow a reporting entity to submit reports prepared to meet other state, national and international reporting requirements – including those consistent with the IFRS Foundation Sustainability Disclosure Standards, as well as voluntary reports – as long as those reports satisfy all of the requirements of the Act.

The reporting entity’s disclosure would be required to include any fictitious names, trade names, assumed names, subsidiaries and logos it uses.

Calculation methodology

Emissions would be required to be measured and reported using the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard and the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard, including guidance for scope 3 emissions calculations that detail acceptable use of both primary and secondary data sources. This includes the use of industry average data, proxy data and other generic data in scope 3 emissions calculations.

Starting in 2034, the New York State Department of Environmental Conservation (DEC) could adopt a globally recognized alternative accounting and reporting standard if it determines its use would more effectively further the goals of the Act.

Disclosures would be required to take into account acquisitions, divestments, mergers and other structural changes that can affect GHG emissions reporting and is disclosed in a manner consistent with the Greenhouse Gas Protocol standards and guidance.

Emissions reporting organization

Disclosures would be required to be submitted to an emissions reporting organization created or contracted by New York. The emissions reporting organization would be required to develop a reporting program to receive and make the reports publicly available.

Assurance

A reporting entity would be required to have its emissions reporting assured by an independent third-party assurance provider. 

The assurance engagement for scope 1 and 2 emissions data would be at a limited assurance level beginning in 2027 and at a reasonable assurance level beginning in 2031. 

No later than January 1, 2028, DEC would be required to review and evaluate trends in third-party assurance requirements for scope 3 emissions. By that date, DEC could establish a scope 3 emissions assurance requirement. If established, it would be at a limited assurance level beginning in 2031. This is a notable difference from California’s legislation, which mandates limited assurance over scope 3 emissions beginning in 2030. 

Implementing regulations

DEC would be required to adopt implementing regulations by the end of 2026.

Among other things, these would include reporting timelines. The reporting timelines would be required to take into account the timelines by which reporting entities typically receive scope 1, 2 and 3 emissions data, as well as the capacity for an independent assurance engagement to be performed by a third-party assurance provider.

No later than January 1, 2031, DEC would be required to review, and update as necessary, the disclosure deadlines for scope 3 emissions data so that information is disclosed as close in time as practicable to the deadline for reporting scope 1 and 2 emissions data.

Liability for violations

Under the Act, the New York Attorney General would be able to bring a civil action against a reporting entity seeking civil penalties of up to $100k per day for willful failure to comply with the requirements of the Act or the regulations adopted thereunder, including for non-filing, late filing or other failure to meet the requirements of the Act. However, the civil penalties could not exceed $500k in a reporting year. 

A reporting entity would not be subject to a civil action under the Act for any misstatements with regard to its scope 3 emissions disclosures made with a reasonable basis and disclosed in good faith.

Penalties relating to scope 3 reporting could only occur for non-filing through 2031.

Climate-related financial risk reporting

Senate Bill 3697 was introduced by Senator James Sanders on January 29. Senator Sanders’ district is in Southeast Queens. Senator Sanders also introduced a similar bill last session.

Reporting entities

“Covered entities” would have to report. A covered entity would include any business entity formed under US law with total annual revenues exceeding $500m in its prior fiscal year and that does business in New York. Entities regulated by the Department of Financial Services or that are in the business of insurance in another state would be excluded.

Disclosure requirement

By January 1, 2028, and every two years thereafter, a covered entity would be required to prepare a climate-related financial risk report disclosing:

• its climate-related financial risk, in accordance with the Task Force on Climate-related Financial Disclosures framework or an equivalent reporting requirement; and
• its measures adopted to reduce and adapt to the disclosed climate-related financial risk.

If a covered entity does not complete a report consistent with all required disclosures, it would be required to provide the disclosures to the best of its ability, provide a detailed explanation for any reporting gaps and describe steps the covered entity will take to prepare complete disclosures.

A covered entity would satisfy its reporting requirements if it prepares a publicly-accessible report that includes climate-related financial risk disclosure information pursuant to a consistent law, regulation or listing requirement, including in accordance with the IFRS Foundation Sustainability Disclosure Standards.

Reports would be able to be consolidated at the parent company level, in which case a subsidiary that is a covered entity would not be required to prepare a separate climate-related financial risk report.

Publication

A covered entity would be required to make its report available to the public on its website.

Penalties

DEC would be able to seek administrative penalties from a covered entity that fails to publish a report or that publishes an inadequate or insufficient report. The administrative penalties would be capped at $50k in a reporting year.

Three takeaways

• The bills are at the beginning stages. They should be on companies’ watch lists, but it is premature to take compliance steps beyond that. The predecessor bills of course were not adopted and it is unclear whether the current bills will gain traction, especially since they cover largely the same universe of companies as are required to report under California’s climate disclosure laws. By that measure, the bills do not seem like a good use of time by the State Legislature.
• If the New York bills are adopted in their current form, given their significant overlap with California’s climate disclosure laws (assuming those laws survive the current court challenge), they will not require much of an incremental compliance lift by most companies.
• Companies should consider whether and when to engage on the bills either directly or through their trade associations. The general consensus is that the California climate disclosure legislation would have benefitted from more and earlier input from the business community.