Summary
Cut through the green tape
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Details
- California
SB 261 was intended to be legally binding for all qualifying companies once enforcement begins.
If in force, companies must:
Conduct a climate-related financial risk assessment covering physical and transition risks.
Prepare a TCFD-aligned public report every two years.
Assess impacts across operations and relevant parts of the value chain.
Describe governance structures overseeing climate risk.
Disclose mitigation and adaptation strategies.
Explain financial impacts associated with climate risks.
Post the report publicly and provide it to the state according to forthcoming CARB procedures.
Exceptions:
Companies with under USD 500 million in annual global revenue are not covered.
Insurance companies are explicitly exempt.
Entities must have a sufficient legal nexus to California (“doing business in California”) for the law to apply; details depend on CARB guidance and tax definitions.
Holding companies or complex corporate structures may face nuanced determinations depending on revenue consolidation rules.
Deep dive
What’s Required
California SB 261 requires large companies doing business in California to publicly disclose their climate-related financial risks and the measures they are taking to mitigate or adapt to those risks. The law applies to entities with annual global revenues exceeding USD 500 million, regardless of whether they are publicly or privately held.
Covered entities must prepare a biennial climate-risk report describing physical and transition risks, impacts on operations and value chains, governance mechanisms, mitigation strategies, and any financial impacts. Reports must follow the TCFD framework or an equivalent standard, and must be made available publicly, typically on the company’s website.
Important Deadlines
First report originally due: January 1, 2026.
Reporting cadence: Every two years thereafter.
Regulatory guidance: California’s Air Resources Board (CARB) is responsible for developing implementation rules and technical guidance.
Judicial update:
In November 2025, a federal appeals court issued a temporary injunction that blocks the enforcement of SB 261 while litigation proceeds. The law remains in place, but companies are not currently required to submit the 2026 report unless the injunction is lifted.
Current Status
SB 261 was enacted in 2023 as part of California’s broader climate-disclosure framework. CARB has developed initial guidance, but detailed regulations are ongoing.
As of late 2025:
The law is temporarily blocked due to an injunction by the U.S. Court of Appeals for the Ninth Circuit.
Enforcement and reporting deadlines are paused until litigation concludes.
The law has not been repealed, and future activation depends on the outcome of the court case.
Penalties for Non-Compliance
If enforced, SB 261 authorizes administrative penalties for failure to submit the biennial report.
Fines may reach up to USD 50,000 per reporting cycle for non-compliance.
Additional administrative fees may apply to support program oversight and implementation.
Penalties are not currently applied due to the injunction.
Examples of Known Violations
No violations or penalties have been recorded because:
SB 261 enforcement has not yet begun.
The initial reporting deadline has been suspended under the judicial injunction.
Early compliance activity has focused on legal challenges and rulemaking, not enforcement.
Resources
