backCalifornia’s new requirements to compel more than 2,600 businesses to disclose their climate-related risks had a remarkably eventful day. On November 18, 2025, the Ninth Circuit Court of Appeals granted an injunction pending appeal, enjoining enforcement of California’s Senate Bill 261 (the “Climate-Related Financial Risk Act” or “SB 261”) while the Court hears full arguments on the merits (scheduled for January 9, 2026). Enacted in October 2023 as part of the California Climate Accountability Package, SB 261 requires companies doing business in California with more than $500 million in annual revenue to publish climate‑related financial risk reports describing both physical and transition risks and the measures they are taking to mitigate and adapt to those risks, with the first reports due January 1, 2026. Plaintiff organizations including the U.S. Chamber of Commerce brought suit and obtained the injunction that for now effectively pauses the January 1, 2026 reporting date.
On the same day (and without regard to) the Court’s decision, the lead agency for SB 261, the California Air Resources Board (“CARB”), held its third public workshop to provide updates on the SB 261 regulations. The workshop provided guidance that will be important for regulated parties in the event that the injunctive relief is lifted and SB 261 becomes enforceable. As a practical matter, that could happen as soon as January 9, 2026, when the Ninth Circuit hears the appeal.
CARB Provides Key Clarifications on Initial Reports Previously Due by January 1, 2026, under SB 261.
CARB’s workshop focused closely on several key regulatory definitions and exemptions, providing helpful direction to those potentially subject to SB 261.
Definition of Covered Entities. A company is a covered entity if (1) it does business in California and (2) it has total annual revenues of more than $500 million. A company does business in California if it actively engages in any transaction for the purpose of financial or pecuniary gain or profit, i.e., has a significant economic nexus within the state. Notably, entities filing with the Franchise Tax Board (“FTB”) will automatically meet both criteria.
Parent-Subsidiary Reporting Relationship. A subsidiary may request that its parent report on the subsidiary’s behalf. If a subsidiary of a parent company qualifies as a covered entity, SB 261 reports can be consolidated at the parent company level.
Reporting Frameworks for Compliance. Disclosures should reflect a company’s effort to assess and communicate climate-related financial risk. To meet reporting requirements, companies are advised to follow one of the following frameworks:
- The Final Report of Recommendations (2017) or subsequent iterations published by the Task Force on Climate-related Financial Disclosures (“TCFD”)
- International Financial Reporting Standards (“IFRS”) sustainability disclosure standards
- A report developed in compliance with applicable official or regulatory requirements
Generally, each report should identify the reporting framework adopted; outline the recommendations and disclosures that have been addressed and those not yet met; and summarize the rationale for excluding certain recommendations or disclosures, including any planned actions for future inclusion. Companies may describe any gaps, limitations, and assumptions made as part of their assessment of climate-related issues. Companies that are just beginning to assess climate-related risks can start by reporting how these risks may be relevant to their operations, even if no material risks have been identified or actions implemented.
Minimum CARB Requirements for Disclosure. In disclosing climate-related financial risk, a company should structure its report around four core pillars: governance, strategy, risk management, and metrics and targets.
- Governance: Companies should provide a general overview of their governance structure for addressing climate-related financial risks and disclose whether there is management oversight of climate-related risks and opportunities.
- Strategy: Companies must describe the actual and potential impacts of climate-related risks and opportunities on the organization’s business model, operations, and financial planning over the short, medium, and long term.
- Risk Management: Companies should outline how they identify, assess, and manage climate-related risks within their overall risk management framework.
- Metrics and Targets: Companies should disclose the quantitative and qualitative measures used to evaluate climate-related performance and the targets set to guide progress toward the company’s climate objectives.
Reporting Timeline and Submission. Pursuant to the statute, SB 261 reports were, prior to the November 18 injunction, to be posted on a company’s website by January 1, 2026. CARB indicated it would open a docket starting December 1, 2025, which would be closed on July 1, 2026, for companies to post links to their reports.
Reporting Outlook and Pending Guidance
It is possible CARB may issue an advisory following the Court’s injunction. In the meantime, while some companies may decide to report on or before January 1, 2026, at least by posting a link on their website, many other companies are likely to wait for further developments from the appellate Court or CARB. Notably, the Ninth Circuit did not stay a second California disclosure law, SB 253, that requires certain companies to disclose Scope 1 and 2 greenhouse gas emissions. Since the Ninth Circuit declined to also stay SB 253, companies should continue to plan for compliance with that law by August 10, 2026 (based on recent guidance from CARB).
Given the dynamic regulatory environment surrounding California’s climate risk disclosure requirements, it is essential for companies to stay informed and agile in their compliance strategies. Whether your organization is preparing to report, considering a wait-and-see approach, or seeking clarification on the latest CARB guidance, the King & Spalding Environmental, Health and Safety team is ready to assist. We can help interpret new developments, assess your reporting obligations, and develop a tailored compliance plan that aligns with your business objectives.
Additional contributors: Alina Zhang