Updated information regarding this topic added December 12, 2025. Click here or scroll down for New Developments.
On November 18, 2025, the U.S. Court of Appeals for the Ninth Circuit paused the enforcement of the California Climate-Related Financial Risk Act (SB 261) while the lawsuit challenging SB 261 and the Climate Corporate Data Accountability Act (SB 253) is being decided on appeal.
The order specified that the injunction only applies to the enforcement of SB 261, which requires covered parties to post their first climate risk reporting on January 1, 2026. The Ninth Circuit denied the request for an injunction as to the enforcement of SB 253, which does not require initial reporting until the middle of 2026 (likely August 10, as recently announced by the California Air Resources Board (CARB)).
The lawsuit filed by the U.S. Chamber of Commerce and business interest groups alleged that SB 253 and SB 261 violate the first amendment because they require businesses to disclose climate-related risks and greenhouse gas emissions. The district court denied plaintiffs’ request for a preliminary injunction in August 2025, and the case was appealed to the Ninth Circuit. On November 14, 2025, the Chamber of Commerce filed an emergency petition with the Supreme Court of the United States but has now withdrawn its petition in response to the Ninth Circuit’s injunction order.
The Ninth Circuit has scheduled oral argument for January 9, 2026.
Meanwhile, CARB has continued to hold public workshops and publish guidance regarding key concepts and checklists to aid businesses with their reporting obligations. The third workshop was perhaps coincidentally held earlier on the same day that the Ninth Circuit issued its order, and we have not yet seen any reaction to the injunction from CARB.
High-Level Requirements
SB 253 requires covered businesses to measure and publicly disclose their greenhouse gas emissions on an annual basis, in conformance with the Greenhouse Gas Protocol standards and guidance. The law defines a “reporting entity” as any public or private U.S. business with total annual revenues exceeding $1 billion in the prior fiscal year “that does business in California.” Covered businesses will be required to disclose Scope 1 (direct emissions) and Scope 2 (emissions associated with electricity consumption) emissions starting in 2026 for calendar year 2025. They will be required to disclose Scope 3 (indirect, value chain emissions) emissions, as well, starting in 2027 for calendar year 2026.
SB 261 requires “covered entities” to prepare a report (beginning on January 1, 2026) addressing (1) climate-related financial risks in accordance with the framework published by the Task Force on Climate-Related Financial Disclosures and (2) the measures adopted to reduce and adapt to those risks. A covered entity must post this report on its website and provide a link to report to CARB, as well. “Covered entities” are defined in the same manner as SB 253’s “reporting entities” but with a lower $500 million annual revenue threshold.
CARB’s Public Workshops
On May 29, 2025, CARB held its first virtual public workshop to support the development and implementation of SB 253 and SB 261. The workshop began with short statements from Sens. Scott Wiener and Henry Stern—the respective authors of SB 253 and SB 261. The senators and CARB made it clear that the current deadlines, as modified by SB 219, will remain in effect. On August 21, 2025, CARB hosted its second public workshop to preview and solicit feedback on proposed definitions and concepts underpinning rules for SB 253 and SB 261. On November 18, 2025, CARB held its third public workshop to provide updates on the preliminary list of covered and reporting entities published in September 2025 and the development of initial regulations. Even though CARB has yet to propose draft rulemaking regulations for these statutes, it emphasized that the statutory reporting deadlines remain firm.
These three workshops provide insight into the agency’s interpretation and planned approach regarding certain key terms from SB 253 and SB 261. For example, CARB previewed its proposed fee structure, as well as its proposed definitions of “revenue,” “doing business in California,” and parent-subsidiary relationships:
- Fees. CARB is pursuing a flat fee structure calculated as annual program cost divided by number of regulated entities—regardless of size. Entities with more than $500 million and less than $1 billion in annual revenue will only pay SB 261 fees. Entities with annual revenues greater than $1 billion will pay both SB 261 and SB 253 fees. CARB is proposing to assess fees beginning on September 10, 2026.
- Defining “revenue.” CARB plans to rely on gross receipts as set forth in the California Revenue and Tax Code Section 25120(f)(2) to determine whether an entity exceeds $500 million and/or $1 billion in annual revenues under each law. CARB’s proposed definition does not deduct operating costs or other business expenses.
- Defining “doing business in California.” CARB proposes to use the definition provided in Section 23101(b) of the California Revenue and Tax Code, with the omission of subsections 3 and 4. Namely, the entity must be engaging in any transaction for purpose of financial gain; and (1) be organized or commercially domiciled in California or (2) have sales in California greater than $735,019 or 25% of the entity’s total sales.
- Parent-subsidiary relationships. Parent companies may file consolidated reports for their subsidiaries to fulfill reporting requirements under SB 261 and SB 253. CARB’s latest proposed definition of “subsidiary” is a business entity that another business entity has an ownership interest in or control of by “direct corporate association” as defined by Title 17, California Code of Regulations, § 95833. This definition aligns with CARB’s Cap and Invest Program definition. CARB has repeatedly stated that only U.S. entities are in scope, but foreign parent companies are allowed to report on behalf of their U.S. subsidiaries.
- Exclusions and proposed exemptions. CARB has proposed to exclude tax-exempt nonprofit or charitable organizations, as well as entities whose only business in California is teleworking employees. Government entities and businesses subject to regulation by the Department of Insurance are excluded by statute.
CARB Guidance Documents
CARB has published several guidance documents to help producers assess their requirements under the climate disclosure laws.
On September 24, 2025, CARB posted a preliminary list of reporting and covered entities to support the development of the fee regulation. This list has no regulatory authority. CARB staff has acknowledged that it is both under- and over-inclusive. Companies must make their own determinations of whether they are subject to the statutes.
On October 10, 2025, CARB posted a draft reporting template for use in SB 253 reporting along with a request for stakeholder feedback, which was due on October 27, 2025. Companies may follow this template but are not required to use it.
On November 17, 2025, CARB released updated FAQs regarding climate disclosure requirements, which cover many of the topics addressed during the workshops.
Also on November 17, 2025, CARB released an updated checklist to help companies comply with SB 261’s January 1, 2026, deadline (Climate Related Financial Risk Report Checklist). The checklist outlines minimum disclosure requirements and clarifies that covered businesses should identify a framework (e.g., the Task Force on Climate-Related Financial Disclosures or IFRS S2) and use the best available data applicable to the business’ specific operations. Reports must include, at a minimum, the following principles:
- Governance. Describe the organization’s governance structure (if any) for identifying, assessing, and managing climate-related financial risks. This must include a discussion of any management oversight of climate-related risks and opportunities and should also include a description pertaining to board oversight.
- Strategy. Describe the actual and potential impacts of climate-related risks and opportunities on the company’s operations, strategy, and financial planning (where material). This includes short-, medium-, and long-term risks and the resilience of the company’s strategy.
- Risk management. Describe how the company identifies, assesses, and manages climate-related risks, including a description of the process the company uses for identifying, managing, and assessing risks and how that is integrated into the organization’s overall risk management.
- Metrics and targets. Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities adopted to reduce and adapt to climate-related risk (where material).
CARB emphasized that a “good faith” effort will be demonstrated by using an entity’s most recently available data, resources, and knowledge.
Next Steps
Specific facts and circumstances will no doubt inform each business’s response to the injunction as to the enforcement of SB 261, as well as to the uncertainty regarding the outcome of the pending litigation challenging both SB 261 and SB 253. At present, however, every reporting entity should consider that SB 253 currently remains in force, and the Ninth Circuit may ultimately lift the injunction as to SB 261, requiring the reporting that is most likely already being prepared based upon the following:
- SB 261 reports. Prior to the injunction, CARB announced it will establish a public docket for companies to post the link to their initial SB 261 reports. The docket will be live on December 1, 2025, and remain active until July 1, 2026. CARB made it clear that the window for posting to the docket does not alter the SB 261 requirement that companies publish their SB 261 reports on their website by January 1, 2026.
- Rulemaking. CARB anticipates proposing regulations to its board for SB 253 and SB 261 in Q1 of 2026. Once regulations are published, CARB will accept public comments for 45 days. CARB anticipates addressing other issues in a subsequent rulemaking later in 2026.
- SB 253 reports. For SB 253 Scope 1 and 2 reporting, CARB is proposing an August 10, 2026, initial reporting deadline. If the reporting entity’s fiscal year ends between January 1, 2026, and February 1, 2026, fiscal year 2026 data will be reported. If the reporting entity’s fiscal year ends between February 2, 2025, and December 31, 2026, fiscal year 2025 data will be reported. CARB has noted in its guidance documents that it will accept data that has not received limited assurance for its 2026 reporting.
CARB also continues to emphasize the December 2024 enforcement notice related to SB 253 in which CARB indicated its intention to exercise its discretion to not take enforcement action against a reporting entity for incomplete reporting of its Scope 1 and Scope 2 GHG emissions for the first report due in 2026, as long as the company makes a good faith effort to retain all data relevant to emissions reporting for its prior fiscal year. Note also that CARB does not intend to take enforcement action regarding SB 253 compliance if a reporting entity was not collecting data or was not planning to collect data at the time the enforcement notice was issued and truthfully informs CARB via a letter on company letterhead of this fact.
New Developments
On December 1, 2025, in response to the Ninth Circuit’s November 18 order, CARB issued an Enforcement Advisory stating that it will not enforce SB 261 (codified as Health and Safety Code section 38533) against covered entities for failing to post reports by the January 1, 2026, deadline, pending further guidance from CARB. You can see the December 1, 2025, CARB Enforcement Advisory here.
On December 9, 2025, the California Air Resources Board (CARB) published proposed regulations implementing the Climate Corporate Data Accountability Act (SB 253) and California Climate-Related Financial Risk Act (SB 261). The 45-day public comment period will commence on December 26, 2025, and run through February 9, 2026. CARB will also hold a hearing on the proposed regulations on February 26, 2026.
The proposed regulations are generally consistent with the guidance provided in CARB’s workshops. The proposed regulations:
- Exempt government entities, nonprofits, insurance companies, and businesses whose only business in California is employee compensation or payroll expenses
- Define several terms, including “Doing business in California,” “Revenue,” “Parent,” “Subsidiary,” and “Covered entity”
- Provide a formula for calculating fees due under SB 253 and SB 261 and set the first annual fee deadline as September 10, 2026
- Establish August 10, 2026, as the first year SB 253 reporting deadline and address the use of fiscal year emissions data
- Confirm that penalties may be assessed for violations, and include an audit provision allowing CARB to consult with the Board of Equalization or the California Franchise Tax Board to obtain data needed to audit fee remittances
