California SB 261 Explained

Senate Bill 261, California's Climate Related Financial Risk Act, requires large companies doing business in the state to publicly report on their exposure to climate related financial risk every two years. It's explicitly modeled on the TCFD framework, and it was meant to be the first mandatory climate risk disclosure law of its kind in the United States. As of mid 2026, it's also the subject of active litigation that has paused its enforcement, a status every affected company needs to understand before assuming the law is currently in effect.

This article provides general information current as of July 2026, not legal advice. This area of law is actively changing, consult qualified counsel before making compliance decisions.

Who SB 261 Applies To

The law covers corporations, partnerships, limited liability companies, and other business entities with total annual revenues over $500 million that do business in California, a threshold roughly aligned with California's existing tax code definition of doing business in the state.

What It Requires

Covered entities must prepare and publicly post a climate related financial risk report every two years, describing the company's climate related financial risks and the measures it has adopted to reduce and adapt to them. The report is expected to address governance, strategy, and risk management processes, following the same structure TCFD and IFRS S2 use, and to describe both physical risks, like flooding, wildfire, and extreme heat, and transition risks, like regulatory or market shifts tied to decarbonization.

Current Legal Status

SB 261 was challenged in federal court by business groups including the U.S. Chamber of Commerce, arguing the law compels speech in violation of the First Amendment, the same argument raised against its companion law, SB 253. The Ninth Circuit's injunction specifically paused SB 261 enforcement, not SB 253, which continues through CARB rulemaking. CARB has opened a voluntary reporting docket for companies that choose to report anyway while the appeal is pending, but has stated it will announce a new mandatory deadline only once the litigation is resolved. As of this writing, the appeal remains unresolved and there is no confirmed new compliance date.

What Companies Should Do Now

Even with enforcement paused, the underlying requirement hasn't gone away, it's delayed, not canceled, and companies that wait until a final ruling to start preparing will have considerably less runway than those building their reporting capability now. The core preparation work, identifying physical and transition risk exposure across a portfolio, building governance and risk management processes, and establishing the data systems to support ongoing reporting, is the same work needed regardless of exactly when a final deadline lands. Our article on how climate resilience data supports SB 261 and TCFD reporting covers what that preparation actually looks like in practice.