SB 261 and Climate Risk Reporting

Now that we’ve covered greenhouse gas reporting under SB 253, this lesson returns to SB 261, the climate-related financial risk analysis and disclosure portion of California’s climate accountability package.

SB 261 Reporting Requirements

At a high level, SB 261 requires in-scope companies to prepare a climate-related financial risk report aligned with a recognized reporting framework: The Task Force on Climate-Related Financial Disclosures (TCFD).

CARB’s guidance organizes those disclosures around the same four pillars used in established climate disclosure standards: Governance, Strategy, Risk Management, and Metrics & Targets.

In addition to those framework-aligned disclosures, SB 261 also expects companies to describe the measures adopted to reduce and adapt to the climate-related financial risks they identify.

SB 261 reporting is intended to occur on a biennial basis (every two years). CARB’s checklist and workshop materials refer to the first reporting cycle as due January 1, 2026, under the statute.

Where SB 261 Stands Right Now

It’s important to keep two things true at the same time:

First, SB 261’s statute sets an initial reporting deadline of January 1, 2026, with ongoing biennial reporting thereafter. CARB’s workshop materials also describe the expectation that the report is posted on your website and that a link is submitted to CARB.

Second, as of December 1, 2025, CARB issued an Enforcement Advisory stating that, due to a court order, CARB will not enforce SB 261 against covered entities for failing to post and submit reports by the January 1, 2026, statutory deadline while the injunction remains in effect. CARB notes that it will provide further information—including an alternate reporting date, as appropriate —after the appeal is resolved.

In practical terms, many companies are continuing to prepare disclosures using CARB’s checklist, so they’re ready to publish when timelines are clarified (and to align with broader stakeholder expectations).

A Quick Reassurance: This Is a Framework, Not a 500-Page Regulation

A helpful way to think about SB 261 is that it is rooted in well-established frameworks designed to help companies communicate climate risk clearly and consistently. CARB’s SB 261 checklist is designed to help companies understand minimum expectations and encourages companies, especially those early in their journey, to describe limitations, gaps, and assumptions transparently.

In other words: this is not about “perfect reporting.” It is about beginning with what you know, documenting your approach, and improving over time.

TCFD and ISSB: How the Framework Landscape Fits Together

SB 261 allows companies to use more than one established reporting framework. CARB explicitly recognizes that companies may use:

• TCFD recommendations (2017 or later),
• ISSB / IFRS sustainability disclosure standards (including IFRS S2 for climate), or
• A report prepared to comply with another government or regulated exchange requirement (as described in the statute).

One update to keep in mind: the TCFD task force has disbanded, and the IFRS Foundation has taken on responsibility for tracking progress on climate-related disclosures. Even so, the TCFD pillars and recommendations remain a foundational structure, and CARB continues to reference them directly as acceptable for SB 261 reporting. 

Because ISSB standards (including IFRS S2) incorporate the same four pillars, many companies think about this as an opportunity to “future-proof” their disclosures by aligning with ISSB while still meeting SB 261 expectations.

The Four Pillars of SB 261 Reporting

SB 261 reporting expectations are commonly organized around four pillars, outlined in more detail below.

1) Governance

The governance pillar is about oversight and accountability. It typically describes the role of the board and management in overseeing climate-related issues, including how climate considerations are elevated, discussed, and monitored.

In practice, many companies answer questions like:

• How and how often does the board (or a board committee) receive updates on climate-related risks?
• Who in management is responsible for assessing and managing these issues?
• How are decisions tracked over time?

Strong governance disclosure often reads as a clear narrative of “who owns what,” supported by a simple diagram or table showing roles and escalation paths.

2) Strategy

The strategy pillar focuses on the climate-related risks and opportunities the company has identified, how they may affect the business, and how the company tests the resilience of its strategy under different climate scenarios.

This is often the section that feels most daunting, but the key is to remember: most companies already have processes for identifying and managing business risks. Strategy disclosures under SB 261 are often about applying a climate lens to those existing processes.

CARB’s checklist recognizes that companies may be at different maturity levels. Early-stage disclosures may begin qualitatively—what risks are relevant, where exposures may exist, and how the company intends to deepen analysis over time.

A useful way to approach this pillar is to start by defining:

• Short-, medium-, and long-term time horizons, and
• The main physical and transition risks relevant to your footprint, operations, and value chain.

Scenario analysis (even if initially qualitative) can then help explain how different climate outcomes could change the company’s risk profile and strategic decisions.

3) Risk Management

Risk management disclosure explains the company’s processes for identifying, assessing, prioritizing, and managing climate-related risks, and how those processes connect to overall enterprise risk management, if applicable.

This is primarily narrative. It often answers:

• How does the company determine which climate risks are significant?
• How are climate risks prioritized relative to other business risks?
• How are risk decisions made (mitigate, transfer, adapt, accept), and who approves them?

CARB’s guidance also notes that companies can disclose gaps, assumptions, and limitations, especially while processes are still developing.

4) Metrics and Targets

The metrics and targets pillar is where companies disclose the measures they use to assess and manage climate-related risks and opportunities, and how performance is tracked.

This pillar does not require a universal checklist of metrics. Instead, it asks: what does your company use today, and what targets guide progress?

Examples can include:

• Internal KPIs tied to climate risk exposure (e.g., facility resilience indicators)
• Transition metrics (e.g., product portfolio shifts, capex alignment)
• Targets (e.g., net zero commitments, interim reduction goals, energy efficiency goals)

CARB’s checklist also references disclosure of Scope 1 and Scope 2 (and, if appropriate, Scope 3) emissions within climate-risk reporting frameworks. Many companies align emissions disclosures across SB 253 and SB 261 to keep reporting consistent (without duplicating work).

SB 261 Disclosure and Submission Requirements

CARB’s workshop materials describe the SB 261 process as involving:

1. Posting the climate-related financial risk report publicly on the company website, and
2. Submitting a link to the report through CARB’s docket process.

CARB has opened a public SB 261 docket for entities that choose to submit report links (particularly relevant while enforcement is paused).

And importantly, CARB’s checklist notes that a report submitted to CARB should include:

• A statement identifying the framework used,
• Which disclosures were included or omitted,
• Reasons for omissions and plans to improve future disclosures.

Key Takeaways

SB 261 is fundamentally an exercise in communicating, in a structured way, how your company understands and manages climate-related financial risk. The most effective reports are typically clear, well-organized narratives that describe governance, processes, and decision-making, not just a collection of metrics.

And because many companies globally have been reporting along these lines for years, there is a large body of examples and best practices available to support first-time reporters.