Ep. 18: Attorney and climate entrepreneur Catherine Atkin on California's pathbreaking new greenhouse gas emission disclosure law

SEASON 1 EPISODE 18

[INTRODUCTION]

[0:00:07] ANNOUNCER: This is Financial Climate. Can innovations in finance help the world decarbonize? How can trillions of dollars of assets be redirected to catalyze a net-zero economy? We explore these questions through conversations with innovators, experts, and investors from around the world. Here's your host, Alex Roth.

[0:00:34] AR: The Paris Climate Agreement was designed to keep Earth habitable through a framework of national emission reduction commitments, but actual binding laws enforcing those commitments are still lagging behind. In response, many corporations have promised to reach net-zero emissions voluntarily. Many have released plans of how they intend to do that. Consumers and investors have sought to hold them accountable.

A lot of corporate commitments are based on a raggedy patchwork of emission disclosures. Too often, their climate plans are full of caveats, inconsistencies, and outright greenwashing. Federal government action to require rigorous climate disclosures is at best slow and coming. But California has found a brilliant workaround. If California were a country, its economy would be the fifth largest in the world. If California can pass a state law that affects companies doing business there, they can set a standard that companies are held to around the country and the world.

On October 7th, California Governor, Gavin Newsom, signed a bill called the Climate Corporate Data Accountability Act, championed by state Senator Scott Wiener. The law will soon require rigorous and standardized disclosures for a huge number of companies that do business in California.

My guest today is Catherine Atkin. She's an attorney, a climate entrepreneur, and the Co-Founder of a nonprofit organization called Carbon Accountable. She's also a CodeX Fellow at the Stanford Center for Legal Informatics. State Senator Wiener's office described Catherine as the legal mastermind behind the new law.

I wanted to hear how the legislation came about, what its many effects will be, and how it will interact with other laws. I wanted to better understand what it will mean for our ability to hold corporations accountable and to harness their power to help the world decarbonize. Here's our conversation.

[INTERVIEW]

[0:02:50] AR: Catherine Atkin, welcome to Financial Climate.

[0:02:54] CA: Glad to be here this morning. Thank you for inviting me.

[0:02:59] AR: California has just enacted, or will have perhaps enacted by the time people are hearing this, a very important new climate law that has been called Senate Bill, or SB 253, which I think its official name would be the Climate Corporate Data Accountability Act.

[0:03:15] CA: Yup, you got it right. It's a mouthful.

[0:03:18] AR: Yes, yes. That's a very rich topic. But before we get into that, it'd be great if you could just talk briefly about your own professional background and how you got involved with climate issues and the fight to pass this particular law.

[0:03:32] CA: Yeah. Thank you so much for this opportunity to think about that, because so often, when you're doing something like, trying to pass what is being called a landmark bill, it's super gratifying. You're just heads down to get that done. Just a little bit about me, I am an attorney by education and professional training. I worked actually in D.C. on the banking and financial services committee. I've always been a policy entrepreneur, really thinking about things, big picture, like, what are we trying to make a difference on and what are the biggest blockers and the biggest opportunities for change?

I was a public interest attorney for quite a while. Then I went into the education ed tech space. Then at a certain time around, actually around 2018, I felt like I’d done my part in that space. I'd become really passionate about the power of technology and the necessity to create markets to scale not only social impact, but all kinds of impact and was thinking about the next big challenge.

At that time, we were a couple years post the Paris Agreement. What we were starting to see is that it is awesome for countries to make these nationally determined contributions, but it doesn't just happen by itself. That's just the invitation for all of us to get busy in making the needed changes. I also got really focused on GHG emissions as a core data set that we needed to be focused on, right? That as we were creating and all doing our part, GHG data and climate data had to be the beginning, middle, and the end, or else, we weren't going to make the 1.5 degree future that we know we're so determined to make and create for ourselves and future generations.

Really focused on GHG emissions. As I said, that big picture policy long person, I began to look at the private sector. I looked at the international and national regulatory environment and realized that this voluntary emissions reporting that was really has been standard practice had served its purpose, but it wasn't really fundamentally driving a change in private sector behavior. And so, came to the realization that really, the next turn of this wheel had to be mandatory, private sector, corporate emissions reporting. Corporations would have the information, shareholders and consumers would have the information. We would also be addressing greenwashing.

That's why myself and another colleague formed Carbon Accountable and put together a state-based policy solution that is now SB 253, the Climate Corporate Data Accountability Act. We're excited that by the time this podcast comes out, that will have become law in this country.

[0:06:24] AR: That's great. For people who aren't familiar with it, can you just explain just really briefly in general terms, what does it do?

[0:06:31] CA: Yes, definitely. When you think about corporations right now, they emit GHG emissions, both in their own production and use of electricity and other energy sources, what's called scopes one and two emissions, as well as their supply chain emissions, which is both the upstream and downstream activities that a business has in their value chain. Those are what they call scope three emissions.

We've got a construct that is internationally recognized to think about GHG emissions from corporations. Those scopes one, two, and three emissions up to now have not been something that corporations have been required to publicly disclose. SB 253, this new corporate GHG emissions law in California, will require any corporation with revenues of over a billion dollars to disclose their full scopes one, two, and three emissions on to a public registry. That will be both public and private corporations in the United States. There's about 5,400 of those that we think will be subject to this new law. That will really be a game changer.

We've never really had a full complement of corporate GHG emissions data in the United States. We're also joining a growing, enabling environment globally. We have the EU doing this, other countries doing this. We're all converging on this next step we all need to take to ensure a 1.5-degree future for ourselves.

[0:08:10] AR: Got you. Fundamentally, at its basic level, it's about disclosure of all different companies that have a connection to California. Then there's a whole bunch of other effects of this that might come as second order effects. Maybe we can go through some of those piece by piece. But I guess, one is that this is an example of a state that's passing a state law, but that actually has national and probably global effects. Maybe you can talk a little bit about the impact of the law in terms of how it extends its influence beyond just California?

[0:08:44] CA: Yes. The great thing is California has this long history of really setting the standard on the environmental and climate policies. What starts in California often becomes like, that's where the nation goes and that influences the rest of the world. We've had that with cap-and-trade and the low carbon fuel standards. This is the next in a long line of landmark policy reforms, where California basically takes the fact that we are the fifth, maybe soon to be the fourth largest economy in the world and recognizes that in the case of this new corporate GHG emissions law that California can't protect its residents, unless it addresses global climate change. And that because of the largesse of the California economy, that corporations that want to do business in California need to make it sure – if they want to do business in California, then they need to disclose their carbon emissions data.

That carbon emissions data is basic financial data as you have on your 10K, or any other kind of internal financial report. We see the fact that those largest companies in the United States, many with global reach, when you report to California on your entire GHG emissions footprint, if you're Apple, you're reporting not just on what happens in California and what happens in the US, but what happens for your operations all across the globe. We're not only going to be impacting US corporations, we're going to be impacting the global environment.

[0:10:22] AR: I know there's been a lot of press lately about the US Securities and Exchange Commission working on a rule, which is not the same as legislation obviously, but would have national effect regarding public companies and disclosure of greenhouse gas emissions. Can you talk a little bit about the relationship between these two things? How are they different, and what do you think might be the effect on the federal effort, now that something is really happening at the state level in such an important state as California?

[0:10:53] CA: I'm super excited about the SEC's rule. We know that it's important that we have meaningful climate policy reform at all levels of government. SB 253 in the working California was never meant to be the only thing that happens. We did recognize early on as we developed a carbon accountable, the bill policy that we then took to Senator Wiener at the end of 2020 to carry as legislation. We knew that the SEC was in the process, or beginning to think about developing a rule on climate risk disclosure. Sort of a broader frame, as you know, there is climate risk disclosure which includes a more intensive and broad look at climate risk on capital. Then a part of that is GHG emissions disclosure. We felt like the GHG emissions disclosure is really the key driver. That's why we chose to focus on the carbon data as the key element of this reform.

The SEC rule at that time early on looked promising that it was going to be able to put together a mandatory requirement that would be robust in requiring full scope, or close to full scope emissions. Unfortunately, what we've seen and your listeners have seen in the papers that the SEC has come up against a lot of the political headwinds that many have seen in trying to make things happen in Washington DC. SB 253 does take an even more comprehensive look at scope 3, supply chain emissions, than SEC. That was one distinguishing policy element.

Also, really importantly, is that SB 253, this California reform includes private corporations. We felt strongly that we have to stop just focusing on publicly traded corporations. The fact is that there are twice as many billion-dollar privately held companies as there are publicly traded companies. We have very little visibility into those companies and what is happening with regards to their carbon footprint. We thought it was critical to have that broader view.

The SEC rule has, as I mentioned, come up against some strong headwinds. I am hopeful that the SEC finalized rule will be a strong one. I know that they want to do right by GHG emissions disclosure for corporations. I do think they are going to, even if they get the policy right, they're going to have major legal challenges federally, which will, I think, be more difficult to overcome than a law passed in California. That being said, I think, obviously, President Biden and the SEC Chair Gensler are doing their best at this time. We hope that we see a great rule there.

It does actually – it would, when it's finalized, cover more publicly traded companies, because it actually goes to a lower threshold. We'll get some coverage there. Really, when California passes this law, we're covering the biggest companies with the gold standard.

[0:14:06] AR: You were talking a little bit about potential legal challenges, or other difficulties that the federal effort may run into, the federal regulations from the SEC. Do you anticipate that there will be legal challenges that could jeopardize the future of this law as well? Or another thing that's happened in other efforts is where corporations that oppose this seek to obtain some form of federal legislation that then preempts state action and says, “Well, states can't do anything, because the feds have this.” They prefer that, because they feel they have more control at the federal level. Do you see that there may be obstacles that could jeopardize the full implementation of this law? Or do you think it's pretty smooth sailing ahead in terms of being able to implement it as it was designed?

[0:14:50] CA: I would say, I think there's a distinction between whether this law will be challenged, which I think almost certainly it will be, and whether or not as a piece of policy that was passed by the legislature and also has an attorney general that is supportive of environmental and climate reforms. I think we're in a much stronger position, both just in terms of the actual foundational legal challenges that could be brought against this in contrast to the kinds of challenges that could be made, the major questions doctrine, delegation of power at the federal level doesn't exist here in California for us.

We're feeling very confident about being able to withstand a legal challenge. That being said, we experienced tremendous business opposition to this bill. I would say, I want to distinguish that from some really forward-thinking companies that came out. It was really important and inspiring to see the Apples, Google, Microsoft, others come out in support of this bill in contrast to the business lobbies and some of the organizations that they're part of. But it has been a vociferous opposition.

I just want to give so much credit to Senator Scott Wiener to have the passion and the fortitude and the smarts to push forward with this policy in the face of all that, and obviously, Governor Newsom as well. I don't have a line of sight on that, but I am sure he heard from those same voices. We have definitely experienced opposition to this policy. I think that will continue with legal challenges. I'm confident that we're going to be victorious in those, and we have a great AG Rob Bonta in California. I think everybody's lined up on that.

[0:16:49] AR: Well, that's great to hear. I just want to go back to something you were talking about a moment ago, about how at the federal level, the regulation would apply to publicly traded corporations, meaning these are typically large corporations and they're ones that are traded that you could buy shares of on, for example, the NASDAQ, or the New York Stock Exchange. There are many, many other companies that are closely held, meaning that they're held by investors that don't trade them publicly on some exchange. Therefore, there's almost no visibility into many of those companies generally and with respect to greenhouse gas emissions particularly.

Given that that is a huge advance that this California law has, it requires visibility into those privately held companies, one of the things we've seen a lot of is when publicly traded companies, or highly visible companies are under pressure to reduce their greenhouse gas emissions, they often take their dirtiest parts of their operation, or their dirtiest assets and then they either spin them off into these private companies that don't have that public visibility, or they take parts of their activities, or supply chain that are the most problematic and they choose to outsource them from contractors, or from places overseas, and so forth. Can you just talk a little bit about how that aspect of incorporating those private companies into this disclosure law can help to clamp down on some of those practices?

[0:18:17] CA: Yes. I mean, that to us in developing this bill concept and advancing this bill, as I said, hallmarks, non-negotiables, were full scope emissions were not going to really create the demand for decarbonization, unless that supply chain is included. That's often 90% of a company's total GHG emissions are associated with its upstream and downstream emissions. To include private companies is critical, because not only should they be responsible for their GHG footprints and their carbon emissions, they also cannot be the place where public companies park pieces of their emissions that they no longer want to really take responsibility for.

Really, the idea, we wanted to make sure that nobody gets to sell off a really dirty part of their supply chain and give it to the private side of this and allow that really high carbon intensity activity to never see the light of day. Certainly, for all those companies to take responsibility for their entire supply chain. We feel like we're going to be just creating a huge drive for clean tech products, for a clean economy, and for clean energy. All those things we know are absolutely necessary for us to keep pace with and actually increase the pace of our decarbonization efforts.

Yes, public and private key. I think it's going to be really fascinating to see what happens in the private sector when they have to start disclosing. One of the things we felt that made us feel confident about asking about for full scope disclosure is that GHG emissions, accounting, and reporting has become much more commonplace than it was, say, 10 years ago, where you had a small number of companies doing this.

This is really contrary to what opposition says. Not difficult to do. We have these amazing tech-enabled solutions now, too. All the big accounting firms. You've got a GHG accounting startups, like Persefoni that are really creating modest and low cost when it comes to a large company, ways in which they can easily account for their carbon footprint, using that secondary data and these emissions factors spend and activity data.

I think with the private sector, we know that there is less reporting that's going on. Maybe they're doing it internally. I mean, we also heard consistently, companies are doing this GHG accounting for their own purposes. They're just not disclosing it. We saw in the private in the publicly traded side that there's a lot of penetration, that there's a lot already doing this and maybe not doing all of scope three, but they've been doing quite a bit. On the private side, I think it's going to be fascinating.

[0:21:15] AR: Very interesting. What do you see as the theory of change as to how this can have an effect on greenhouse gas emissions? Because on its face, of course, this is a disclosure law. All it does is requires people to say what they're emitting. Doesn't have any requirements regarding how much they can emit. One way in which there could obviously be an effect is through consumers and through investors, both of which can look at companies' emissions, get a clear picture of that and make decisions.

On the other hand, though, both of those mechanisms have their inherent limitations, right? Only some percentage of consumers and investors are going to look at that. Do you see ways beyond just consumers and investors in which this could have a positive effect by having that information available to people in terms of either follow-on legislation, or greater understanding that occurs to the transparency, or other ways?

[0:22:07] CA: This California reform is going to, I think, catalyze decarbonization from both the consumers, the investors, and creating that surround sound. I think that, as you said, it's a simple disclosure bill, but the fact that there was such a vociferous opposition to the bill tells you something, right? I mean, there's a reason why tens of millions of dollars were spent trying to defeat this bill in California. I think that we've seen in Europe with the recent passage of the CSRD, the Climate Sustainability Reporting Directive and other countries putting in place these GHG emissions requirements, we're going to do a number of things.

One is we are going to put companies on notice about greenwashing. We've already seen in Europe some pretty impactful litigation and fines assessed on companies when they make net-zero commitments, and then we find out that they really don't have a basis for those, that they're not making the progress that would be required. I think having that data out there year over year is going to be an amazing way to clarify what corporations are, or not doing. I also think that investors are becoming much more concerned about climate risk. The fact that transition risk is real, so I think that I've been heartened to see in CERES and other investor coalitions really coming on board, CERES was a co-sponsor of this bill, and really realizing that those investors need just them asking corporations for their carbon emissions information isn't getting them what they need.

I think that as we see the effects of climate change in real-time now, too, I mean, there's been some things that have really switched even in the three years since we've done this bill. I think this understanding of GHG emissions and carbon accounting and footprints is just a pretty new concept. Then the recognition that climate change is here now, that it's not only about decarbonization for the future, but it's like, how are we building an economy that's going to be sustainable? Those are things that I think are going to be super powerful for consumers and investors and policymakers, certainly are going to be able to look at this information and not just in California.

I've been on calls with people from other states, and they're going to get to look at this data themselves and to see the actors in their states and what they're saying and what they're doing. I think that not only consumers, but policymakers are going to be able to step back and say, “Okay, what has to happen next? What should we do to make sure that we're moving both the private sector, but also the public sector along?”

[0:25:09] AR: Yeah, really interesting. I want to go back to what you were saying about potential lawsuits around companies that make promises around improving their greenhouse gas emissions and that don't follow through on those. Do you see that as an area for growth? Because I think we're already starting to see some lawsuits, but it seems like, disclosures could provide some fuel to make more of those lawsuits and perhaps, more successful ones partly under a theory around securities law that companies make promises, and then the idea, I think, is that investors rely on those promises and their purchase of the security. If that results in loss of value on the part of the shareholders, then they would have reason to sue those companies. That's one avenue.

We're also seeing a lot of lawsuits around that are in the early stages now, but in terms of holding fossil fuel companies accountable for greenhouse gas related damages, like fires and things of that nature. I don't know if you see either of those as likely areas that this law would help.

[0:26:06] CA: It's really exciting to see the litigation and law come in and begin to really make change in climate. As an attorney and a public interest attorney, you see these waves over time, where you can use the law to make really important changes in the public interest. Whether that was civil rights and environmental litigation. I think we're just beginning a climate litigation opportunity here. What's important as you've said about that is that you need to have the underlying regulatory environment that creates the data and the information that allows you as a litigator and as a policymaker to look at corporate action under a microscope. Because I think that's part of what's been problematic.

We've had some disclosure, voluntary disclosure with say, CDP, using the TCFD, a climate risk disclosure framework. That has really been a Swiss cheese disclosure approach, where corporations decide what they want to disclose and they comply. They don't comply, they explain. You really don't have a way to look year over year at what actually is happening. A lot of those claims around net zero and we're a green, or an eco brand, you just really have not had any visibility. I think that's going to be super important and exciting. I do feel like, let me also just say, if we see corporations dialing some of that back, it's not a bad thing. I think that everybody, we all know, we need to take responsibility for our part of climate change, so let's really have everybody step back and to say what they're going to do and then really do it. I think that is going to be excellent for all of us.

I think that the litigation will certainly be important. I am really also heartened by this inflection point on oil and gas. I think that we've had some really amazing leaders and a lot of advocates protesting against oil and gas, but hasn't really been a mainstream climate—the stakeholders in general saying, not only oil and gas is problematic, but we actually need to hold their feet to the fire. This transition has to happen. You can't be like, we're going to transition by 2070. We don't really tell you how we're going to get there. I think that the oil and gas, this inflection point in a much broader recognition that that has to move. Part of SB 253, part of this disclosure law will also make those companies have to disclose the footprint associated with their use of oil and gas and all of the energy expenditure in their supply chain.

What we look forward to is them becoming stronger advocates for the clean energy transition as they have to take responsibility for how their products and their revenue and profitability are based on oil and gas as our legacy and existing business-as-usual approach to energy.

[0:29:24] AR: That's great. Another piece of this I wanted to ask you about is carbon offsets, because offsets obviously are, they're a complicated area, they're controversial. In some respects, they're not so complicated, which is that a lot of these companies are making some ambitious promises, like they're going to reach net zero by 2050. Then the catch is that they're saying net zero, they're not saying zero emissions. They're saying net zero and the net means, basically, that they're going to pay somebody to do something else that is supposed to be some kind of a climate good deed that's going to offset their failure to actually reduce their emissions beyond a certain point.

There's also a lot of BS, obviously mixed up in those. The best of those carbon offsets are maybe questionable inherently, but the worst of them are just BS. I'm curious, what do you think will be the effect of this law on this industry of carbon offsets, which has become huge recently, but it's also had a lot of criticism recently, and it's really relied upon by a lot of companies that are claiming to have these promises of how they're going to reduce their emissions?

[0:30:32] CA: When it comes to carbon offsets, you might expect me to be somebody with a jaundiced eye. I would say, while I see the mistakes that we've made in developing the carbon markets, I'm also a believer in the role of carbon markets, especially for me when it comes to the global south, and the necessity for the global north to create opportunities for global south to make a transition, which both is sustainable and recognizes those countries have not been the ones creating, spending all the carbon in the wallets, and they still have a lot to do to increase the standard of living for the people in those countries and communities.

To me, carbon credits is something that have a role to play. It has to be very specific and customized. Once again, back to carbon data. To me, it's all about, can you prove the efficacy and the reality of the carbon, avoided carbon emissions in whatever you're doing. To me, we've done ourselves a disservice, and I say we are not directly working on carbon credits, but I've been a person who's spent time thinking about technologies. I mentioned blockchain. I think there's a lot of ways that we could really tighten up the carbon markets.

I think as a sector, it has done a poor job. It dug a hole for itself by allowing, as you said, a lot of really weak credits to be out there and used by corporations. It's bad on both sides, both corporations, using credits that are not strong credits, and also a carbon market production of credits that hasn't really understood the importance of doing it right. I think we’re at an inflection point on carbon credits. I think people are getting very serious about are these measurable and verifiable credits. I think that we're at an inflection point and that house has to get cleaned up.

When I think about how to think about credits in a decarbonization strategy, I think the reality is, and this is where we see things going, and obviously, I'm super supportive of this: credits should not be an excuse for a corporation not to decarbonize its value chain. Credits need to come in after you've done the hard work of decarbonizing your value chain. I think that's what's too often has been happening is let's just add some credits in and worry about our scope three later, as opposed to let's really look at our supply chain, really drive down our emissions, and then let's get some really good credits for that little delta. Because there's going to be some deltas, right? Not everything is going to be zero emissions.

I do think Apple was an interesting harbinger of what we're going to see in corporate America. They came out a couple weeks ago with their big sustainability, unveiling of their next strategy, including the watch that they have now put out. They said, this is a net-zero watch. What they did is, they said, we had 75% decarbonization of the product value chain. Then we got really high quality 25% credits for that 25% GHG emissions delta. I think, that to me is where we're going to see companies going. It's going to be a lot harder for them. One, as you mentioned, legally, for them to say they're going to be a net-zero company, you're going to start looking at their carbon footprint and saying, you can't be saying that.

The way they can show their stewardship on climate change and be consumer facing in a climate friendly way is to look at their products and really focus on individual products, the value chain, and how do you decarbonize that? I'm optimistic. I think obviously, corporate GHG emissions disclosure laws are going to make every corporation think very carefully about what they say. That to me is how to think about the carbon credit piece.

[0:34:48] AR: We also talked about how it's a little bit of a workaround. This law is a little bit of a workaround in the sense that we wish we had a broad comprehensive program that covered the whole country and was done in a unified way. Instead, we have one state that's able to take the lead and have these broad effects all around the world. The flip side of that is, then you have other places like Europe, or potentially other states that may have their own laws that may be similar but not quite the same. I just wonder if you think that that could create problems for compliance, that may actually bring some complexity into it, maybe some unnecessary complexity when a multinational company has to comply across many jurisdictions, especially when they're looking up and down their supply chain that could make it more difficult than it has to be. I wonder if you see that as a problem and if you see ways that maybe that could be alleviated over time?

[0:35:42] CA: No, it's a great question. I think we spent a lot of time in developing the policy and then frankly, improving it over time. I mean, the upside to a three-year journey to get this done is that you also have the chance to really think about how to make this a bill that doesn't duplicate effort, that is streamlined, that recognizes the needs of corporations as they move into this regulated compliance environment on carbon footprint disclosure.

I would say, first and foremost, this bill in California, we were sure that we did not want to recreate the wheel. This is not a California's flavor of GHG reporting. This uses and calls out explicitly the globally recognized GHG protocol as the standard to be implemented. It's not going to be complicated during the regulation process. California is not creating a new standard for corporate GHG disclosure. It is using the standard that is a part of every other standard that is being developed across the world. If you go to and look at the CSRD, the details about the ESRS, their standard, it references the GHG protocol and allows one other standard to be considered. But it's the GHG protocol.

If you comply with the GHG protocol standard, you are going to be set in the EU. In all the other countries, the GHG protocol standard is really considered the gold standard. We felt really good about identifying that standard. We do create an opportunity every five years starting in 2033 to review the standard. We wanted to recognize that this is an evolving landscape and there may be another standard later on that should be adopted by California, as long as it advances the goals of the act, which is for full scope disclosure. If there's something better, California can make that change. That was one of the ways to both root ourselves in the existing gold standard for disclosure, but also create an opportunity for change if necessary.

When it comes to the burdensomeness of this, I think that was really a red herring, frankly, in this. As I said, GHG disclosure reporting is not new. There are many tech-enabled solutions. They estimate, I think ERM did a study and said it was about 250,000 plus or minus for GHG accounting reporting. That's even when you have some of these accounting firms using older methodologies, so more intensive methodology. The fact is for a billion-dollar company, that is peanuts. That's nothing.

The fact that we said, if you're going to do scope, when you do scope your reporting, you start a year later than reporting in scopes one and two, so we built in that phase in. We also recognized that companies, they shouldn't have to submit a different report to California. What we say is, as long as you've met the requirements of the GHG protocol and reporting your carbon footprint, you can just take that report from Europe, staple it and send us the PDF in California, and we will get it in the right format to put on this public database. This is going to be an easily accessible database in California on a digital platform.

You can use the same report as long as the information's there. If you only did half your reporting in that report, you can staple that and then add the other half. If we have the right data, and as you know with AI, there's so many ways in which we don't need to have people do a bunch of different forms anymore. We feel like, we've got a good setup with this reform to ensure that things are streamlined and ensure that we're recognizing that companies are going to take a little while to get ready to do this.

[0:39:45] AR: Well, that's great. Yeah, it sounds like you really had thought through a lot of those issues around implementation from the perspective of the companies that need to comply with that. That's very good. Despite the rhetoric that can be a little bit maddening sometimes.

One other thing I wanted to touch on is that as you're very well aware of, there's another California law that is passing right now about the same time that's called SB 261, which is the Climate Related Financial Risk Act. I know that's really probably literally, will be the subject of another whole podcast. I hope you could touch just really briefly on the relationship between these two and how they act together to help investors and maybe starting just really, really briefly with what the other law does and how that interacts with this one.

[0:40:33] CA: Yes, SB 261, which is the sister companion bill to SB 253 is the Climate Related Financial Risk Act. We really love the idea that we could advance a very deep and focused GHG disclosure law, at the same time recognizing that companies will absolutely benefit and the public and shareholders will benefit from more visibility into the climate risks associated with extreme weather events, flooding and actually, transition risks on those businesses.

SB 261 would require bi-annually that companies with more than 500 million in revenues. SB 253 is a billion dollars or more full carbon footprint. SB 261 around climate risk is any company with more than 500 million in revenues, needs to undergo a climate risk reporting process using the TCFD framework. That is a framework that's been out there for a while. What this just says is if you're going to do business in California, you need to also go through that TCFD reporting process and give us all visibility into those risks that you are going to be facing if you are operating in the United States and doing business in California. We saw them as really nice complements to each other, the broader risk look and the deep GHG footprint look.

[0:42:15] AR: That's great. Yeah, just to clarify, I think most people probably know this by now, but when you talk about transition risk, you're basically talking about the business risk that a company faces from the idea that if the economy decarbonizes faster than maybe they expected, they could be caught flat-footed and therefore, stuck with an outdated business model, basically, or outmoded assets.

Well, it seems like, this is adding a pretty big requirement in the sense of public climate related disclosures. At the same time, you've described how a lot of these disclosures maybe were occurring already, either not being disclosed, or that they were occurring already, but need to be done in a more rigorous way. I wonder if you think this is going to be a transformational change for the industry that works on these kinds of climate disclosures. I imagine that could include, like you alluded to, mainstream accounting firms that want to make sure they expand into this new emerging area. Then companies, where Persefoni may be the most well-known of those, these emerging new companies that focus on this carbon accounting. Is this the beginning of an explosion of a new piece of an industry, or do you think the change will be smaller than that?

[0:43:27] CA: I absolutely think that the GHG accounting industry tech-enabled is going to expand rapidly. I'm all for that. I'm a big supporter of climate tech generally. I think it's really important. I don't think early on necessarily, people were connecting the dots between GHG corporate reporting reform and driving the explosion and scale of climate tech. It's been exciting to see people, the coin drop for them, and realizing that when corporations have to disclose their entire carbon footprint, most notably in a new way on scope three, they're going to be looking for decarbonization solutions.

Those same climate tech companies that were knocking on these big corporate doors and hearing like, we're interested, but maybe not now, I think they're going to see the demand for their solutions increase. I think first among those are going to be the GHG accounting solutions. I think that's fantastic. I just also think the entire space is going to grow, because of this bill and because of a global regulatory enabling environment. To me, California wins big time. That's the other piece of this, the idea that somehow California was going to be – this is going to hurt the California economy. This is absolutely going to turbocharge it. When it's about decarbonization, we're going to be first movers. We're going to do – the big companies are going to do wealth tech, energy manufacturing. Climate tech is going to do well.

Absolutely, we need those sectors to do well. As you know right now, the investing environment is difficult. It is difficult for those companies as we see to move from that early state, early rounds of funding to commercialization and scale. I think SB 253 and this law does its part in helping to get those companies working at the level they need to to really affect global decarbonization.

[0:45:40] AR: Another thing I was curious about is there been many occasions in the past when individual states, or localities have sought to pull off what you have done in California, which is to have a relatively small jurisdiction pass a law that has broader effect on a particular area of interest. One example that comes to mind is I remember for many years, there were people fighting against the wide adoption of genetically modified foods. They would try to pass these local laws and the industry that was countering them was amazingly effective at beating down those local efforts and finding ways to prevent them from succeeding.

I'm curious to know, now having been immersed in this fight for so long and having finally achieved success, if you have any reflections on why is it that this effort, do you think was effective when so many others that follow a similar strategy have not been?

[0:46:35] CA: This is a piece of the story, too, that I think is gratifying and also illustrative as where we go next. What does it take to be successful in advancing major climate action proposals? Certainly, this is, I think, a game changer, but it's not the only thing that needs to happen. Just on a personal note, it's such an honor, really, of a lifetime to be at a spot where I was to see this opportunity and have enough experience in the public sector and in politics, but also deeply in the GHG accounting policy environment to recognize that we had an opportunity to make a big change, to move from voluntary to mandatory, to require full scope reporting and to make it both public and private entities.

I think that understanding the role of states, particularly California, because its economy is so large, right? You couldn't do this as easily in another state, where a company might actually decide it doesn't need to do business in that state if it's going to mean disclosing their full footprint.

I think, one, was just building off of the richness that California affords in advancing a policy like this. I would say, going to Senator Wiener with this bill idea and knowing that in order for it to be successful, you'd have to also have a really passionate and staunch fighter for something that is going to engender tremendous opposition. It's just so much gratitude for Senator Wiener. I've heard him being interviewed recently and he said – they say, “How did this all start?” He says, “Well, I got on this Zoom call during COVID at the end of 2020 with Carbon Accountable. They presented me with this bill idea.” He said, “I didn't know a lot about this, but I went and talked to people and I came back and said, let's do this.” One of the things he says is, “I didn't really realized what a big deal it was.” I mean, right?

What a fantastic contribution he's making on the climate. He's been so great on so many other issues. Just one, I would say, having the right policy for the time, yet knowing what that window is, calibrating your policy in a way that you think is going to advance something. We started also with having science-based targets in this policy. We recognized that was just a little too expansive. We smallified it. We got really good at what does it take to make this a win-win?

I would also say this. Absolutely, this doesn't happen without the grassroots, without climate activists. It was from the beginning, we knew, I can put on my policy, wonk hat, I've had experience with politics, and I know you have to have the street heat, the people that care about this issue and want something to do. Cal Enviro voters came on board. They're a marquee environmental climate organization in California, as well as Sunrise Movement Bay Area advocates and youth around climate.

I would just say that giving those people a space to do something that's meaningful, and then everybody knowing what their role is. Then last year, this year, both CERES, which is a very reputable nationals.

[0:50:16] AR: That's C-E-R-E-S, right? Yeah.

[0:50:19] CA: CERES represents and brings together corporates around sustainability and manages networks around the financial sector and corporate sector. It was so important to have them come on board, recognize that this was their best opportunity to advance this. Their shareholders and investors are asking for it, and to help us bring on corporations really. I mean, they did a fantastic job with that. Then Greenlining Institute came on as well.

I just also want to say, these things take a lot of different people, a great author, then the right group of people and the patience. I mean, we lost at one point the vote, we were lost by one vote. We ended up losing by four last year, but it was heartbreaking. And then just kept going. Senator Wiener was like, “The best things I've done are the things that take me multiple times.”

I think that that to me has some important implications for what we do in the future. I also just want to say, I felt like, some things I saw that allowed this to happen this year were corporations coming onboard, were corporations breaking from the traditional lobby, the Chambers of Commerce, the Oil and Gas Association, the manufacturing association, and recognizing that they can't let those associations represent them on climate, because they're lobbying against the things that we absolutely need.

Corporations recognize and we can't let these big business lobbies speak for us. That we need to pressure them to change their stance on climate. If they're not going to do that, then we're going to begin to step out and say, we have our own opinion on, for instance, SB 253 and SB 261. I think that, to me, starts to show you the roadmap for the future and some of the winds that might be in our sails, because there's definitely going to be the same headwinds. I really think that giving people real things to do that can make a difference is a critical piece of this climate anxiety that people feel.

I really, am excited also to think about what are the next things that we do collectively to give people meaningful ways to do work that can create the right kinds of changes that are going to be a win for the private sector and for government and also, make people understand they have a role to play.

[0:52:49] AR: Yeah, well, that's great. It's a very inspiring set of stories and also, very interesting set of combined factors that all came together to make this possible. And of course, I have to congratulate you for this tremendous victory in California, and so pleased that we're going to see some really amazing changes that are going to come out of this law.

Catherine Atkin—and your organization is Carbon Accountable—thank you so much for joining us on Financial Climate.

[0:53:17] CA: Thank you so much for allowing me to be here today. I'm just super grateful for the opportunity to have worked on this and just all that's going to come next, not just with this particular law, but just all the work we have to do together. Thanks so much.

[END OF INTERVIEW]

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