Quick Guide: Key Sustainability Disclosure Regimes: California climate disclosure laws

In October 2023, Senate Bill 253 and Senate Bill 261 were signed into law in California. Both Senate Bills have now been codified as amendments to Health and Safety Code Sections 38532 and 38533 as the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act, respectively. 

The laws will require certain large public and private U.S. entities that conduct business in California to publicly disclose their Scope 1, 2 and 3 greenhouse gas (“GHG”) emissions and climate-related financial risks starting in 2026.

The California laws are informed by globally recognised frameworks. SB 253 requires GHG emissions disclosures in accordance with the Greenhouse Gas Protocol standards and guidance (“GHG Protocol”). SB 261 requires climate-related financial risk disclosures and is based in part on the recommended framework and disclosures of the Task Force on Climate-Related Financial Disclosures (“TCFD”). Both the TCFD and GHG Protocol are already familiar disclosure standards for many companies. The laws aim to increase transparency and consistency needed by investors, consumers, and other stakeholders to fully understand climate risks and inform their decision making. Accurate and comprehensive data will also assist in effectively identifying sources of emissions and develop means to reduce those emissions.

Both SB 253 and SB 261 are subject to ongoing legal challenges. On 18 November 2025, the Ninth Circuit Court of Appeals granted an injunction pausing enforcement of SB 261. The Court declined to enjoin SB 253, which remains in effect with a 10 August 2026 compliance deadline. Oral arguments were held on 9 January 2026. 

Mandatory 

The SB 253 GHG emissions disclosure requirements apply to “reporting entities”, which are defined as: 

• partnerships, corporations, limited liability companies, or other business entities formed under the laws of California or any other U.S. state or District of Columbia, or under an act of the U.S. Congress,

• with total annual revenues in excess of $1 billion (based on revenue for the prior fiscal year), 

• that do business in California.

The SB 261 climate-related financial risk disclosure requirements apply to “covered entities,” which are defined as: 

• partnerships, corporations, limited liability companies, or other business entities formed under the laws of California or any other U.S. state or District of Columbia, or under an act of the U.S. Congress (but excluding business entities subject to regulation by California’s Department of Insurance, or that are in the business of insurance in any other U.S. state),

• with total annual revenues in excess of $500 million (based on revenue for the prior fiscal year), 

• that do business in California.

Definitions of “revenue”, “doing business in California” as well as “parent” and “subsidiaries” (see below in relation to consolidation) were not included in the laws. Instead, the California Air Resources Board (“CARB”) was tasked with promulgating implementing regulations that include, among other things, these key definitions. 

Initial concepts that were considered by CARB were presented and discussed during public workshops in May 2025. These concepts were further discussed during additional public workshops held on 21 August 2025 and 18 November 2025. 

On 24 September 2025, CARB published a preliminary list of reporting/covered entities, which it considers may be to SB 253 and SB 261.

In December 2025, CARB released proposed implementing regulations that, among other things, (1) define key concepts relevant for determining the in-scope entities; (2) establish CARB’s fee structure for SB 253 and SB 261; and (3) set the initial SB 253 deadline as 10 August 2026.  On 26 February 2026, the members of CARB approved the regulations as proposed. 

SB 253 requires all reporting entities to disclose Scope 1 and Scope 2 emissions beginning in 2026 and Scope 3 emissions beginning in 2027 (on a schedule to be specified by CARB). CARB has approved implementing regulations that establish a first-year reporting deadline for SB 253 for Scope 1 and 2 emissions for the applicable preceding fiscal year as on or before 10 August 2026. CARB announced that it will begin a separate rulemaking on GHG emission reporting requirements for 2027 and onwards.

SB 261 requires covered entities to begin making their climate-related financial risk disclosures on or before 1 January 2026. However, on 18 November 18, 2025, the Ninth Circuit Court of Appeals granted an injunction pausing enforcement of SB 261 pending the appeal. The Court declined to enjoin SB 253. The Court did not explain its reasoning in the one-page Order. Oral arguments were held on 9 January 2026.

SB 253 requires reporting entities to: 

• Disclose publicly each year either to the relevant emissions reporting organization (if contracted), or CARB itself, the Scope 1, Scope 2 and (from 2027) Scope 3 emissions in conformance with the Greenhouse Gas Protocol standards including Scope 3 guidance (or an alternative standard, if one is adopted after 2033).

• Obtain an assurance engagement, performed by an independent third-party assurance provider, on all of the reporting entity’s Scope 1, Scope 2 and Scope 3 emissions. See details of assurance requirements below. 

CARB has published and gathered public feedback on draft guidance and a draft reporting template for Scope 1 and 2 greenhouse gas (“GHG”) emissions reporting under SB 253. Use of the template is voluntary for the 2026 reporting cycle (whether this will change for future reporting cycles is still being considered by CARB). For further details, see our blog post. 

SB 261 requires covered entities to:  

• Publish biennially (i.e., every 2 years) on its website a climate-related financial risk report disclosing:

  • its climate-related financial risk, in accordance with the recommended framework and disclosures contained in the Final Report of Recommendations of the TCFD (June 2017) or pursuant to an equivalent reporting requirement; and 

  • the measures it has 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 must provide the recommended 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.

“Climate-related financial risk” is defined as the “material risk of harm to immediate and long-term financial outcomes due to physical and transition risks, including, but not limited to, risks to corporate operations, provision of goods and services, supply chains, employee health and safety, capital and financial investments, institutional investments, financial standing of loan recipients and borrowers, shareholder value, consumer demand, and financial markets and economic health.”

On 2 September 2025, CARB issued a draft checklist to assist covered entities with developing their initial climate-related financial risk reports. Amongst other things, CARB clarifies that although SB 261 does not specify use of calendar year or fiscal year data, entities should use the most recent / best available data for the first report.  On 17 November 2025, CARB issued a final checklist, which details all of the changes from the draft on the first page. 

Note on 1 December 2025, CARB posted a public docket for covered entities to post the location of their public link to their first-climate related financial risk report (for further details see “Enforcement” below). 

For SB 253, the assurance engagement for Scope 1 and Scope 2 emissions must be performed by an independent third-party assurer at a “limited assurance” level (i.e., negative assurance) beginning in 2026 and at a “reasonable assurance” level (i.e., affirmative attestation) beginning in 2030. 

A copy of the full assurance provider’s report must be provided to the emissions reporting organisation or (if such an organisation is not contracted for this purpose by CARB), CARB.

In FAQs, CARB stated that, for the first report due in 2026, CARB will exercise enforcement discretion, allowing reporting entities to submit Scope 1 and Scope 2 emissions for their prior fiscal year based on information they already have or were collecting when its 5 December 2024 Enforcement Notice was issued, whether or not the data received limited assurance. 

On or before 1 January 2027, CARB may establish a requirement for limited assurance of Scope 3 emissions beginning in 2030.

SB 261 provides that a covered entity satisfies its climate-related financial risk reporting requirements if it prepares a publicly accessible biennial report that includes climate-related financial risk disclosure information either: 

• pursuant to existing laws, regulations or listing requirements issued by any regulated exchange, national government, or other governmental entity that incorporates SB 261’s disclosure requirements, including the International Financial Reporting Standards Sustainability Disclosure Standards, as issued by the International Sustainability Standards Board; or 

voluntarily using a framework that meets SB 261’s disclosure requirements or the International Financial Reporting Standards Sustainability (“ISSB”) disclosure standards.

Scope 1, Scope 2 and Scope 3 emissions, and climate-related financial risk reports may be consolidated at the parent level. 

If a subsidiary of a parent qualifies as a reporting/covered entity, the subsidiary is not required to prepare a separate emissions disclosure or a separate climate-related financial risk report.

CARB’s regulations state that administrative penalties may be assessed for violations of SB 253 and SB 261, any violation may be enjoined, and CARB may contract with outside entities to conduct audits.

CARB has been directed that reporting entities will not be subject to an administrative penalty for any misstatements regarding Scope 3 emissions disclosures made with a reasonable basis and disclosed in good faith. Further, any penalties assessed on Scope 3 reporting between 2027 and 2030 will only be for non-filing.

CARB has issued an Enforcement Notice in relation to SB 253, which confirms it will not take enforcement action for incomplete reporting against entities during the first reporting period, as long as the entity makes a good faith effort to retain all data relevant to emissions reporting for the entity’s prior fiscal year. 

In response to the temporary injunction issued by the Ninth Circuit Court of Appeals, CARB has issued an Enforcement Advisory Notice in relation to SB 261, which states that the public docket is open for voluntary submission of SB 261 reports and that CARB will not enforce SB 261 against covered entities for failing to post and submit reports by 1 January 2026.

In December 2025, CARB released proposed implementing regulations that, among other things, (1) define key concepts relevant for determining the in-scope entities; (2) establish CARB’s fee structure for SB 253 and SB 261; and (3) set the initial SB 253 deadline as August 10, 2026. 

On 26 February 2026, members of CARB approved the adoption of the regulations as proposed. CARB must submit the regulations in a final regulatory package to California’s Office of Administrative Law before the regulations become effective.  

CARB will begin a separate rulemaking on GHG emission reporting requirements for 2027 and onwards, and on the assurance requirements associated with such reporting.

Pursuant to its recent Enforcement Advisory Notice, CARB stated that it “will provide further information, including an alternate date for [SB 261] reporting, as appropriate, after the appeal is resolved.”  

• Climate Corporate Data Accountability Act (SB 253)

• Greenhouse Gases: Climate-Related Financial Risk (SB 261)

• Greenhouse Gases: Climate Corporate Accountability: Climate-related financial risk (SB 219)

• Enforcement Notice: The Climate Corporate Data Accountability Act 

• Climate Related Financial Risk Disclosures: Draft Checklist

• Climate Related Financial Risk Report Checklist

• Preliminary List of Reporting/Covered Entities

• California Corporate Greenhouse Gas Reporting and Climate-Related Financial Risk Disclosure Programs: Frequently Asked Questions Related to Regulatory Development and Initial Reports

• CARB Draft Guidance and Draft Reporting Template (for Scope 1 and 2 GHG emissions reporting under SB 253)

• CARB Notice of Extended Rulemaking Timeline

• California Corporate Greenhouse Gas Reporting and Climate-Related Financial Risk Disclosure Initial Regulation | California Air Resources Board

• CARB Enforcement Advisory Notice

• CARB approves climate transparency regulation for entities doing business in California | California Air Resources Board

• Blog post - California Legislature Passes Landmark Climate Disclosure Laws

• Blog post - US: The SEC’s Climate Disclosure Rules: detailed analysis

• Blog post - SEC Voluntarily Stays Climate Disclosure Rules 

• Blog post – California Climate Disclosure Laws: CARB publishes draft guidance on climate-related financial risk reporting and preliminary list of reporting/covered entities 

• Blog post – California Climate Disclosure Laws: CARB extends rulemaking timeline to Q1 2026 after publishing draft guidance and reporting template for GHG emissions