Who must report under SB 261?
SB 261 applies to corporations, partnerships, limited liability companies and other business entities formed under US law with total annual revenues above 500 million dollars that do business in California. Revenue is measured for the whole entity, not just California sales. Companies regulated by the California Department of Insurance or in the insurance business in another state are excluded. A parent company may publish one report covering its subsidiaries, so a group often produces a single report. See California SB 253 for the emissions law, which uses a threshold of one billion dollars. The revenue and doing business tests work the same way as for SB 253; see who must report under SB 253.
What must an SB 261 report contain?
The report must disclose the company's climate-related financial risk, meaning the risk of material harm to its immediate and long-term financial outcomes from climate change, including risks to its operations, supply chain, employees and investments, in line with the recommended disclosures of the Task Force on Climate-related Financial Disclosures, or a successor framework such as the ISSB's IFRS S2, or reporting required by law or an exchange. It must also describe the measures adopted to reduce and adapt to those risks. A company that cannot meet every recommendation must say what it has omitted, why, and how it plans to close the gap. The report is published on the company's website. See IFRS S2 climate disclosures.
SB 261: a company's first climate risk report
A US manufacturer with 800 million dollars of revenue and a distribution centre in California is below the SB 253 threshold but inside SB 261. It prepares its first report using the TCFD's four pillars and CARB's checklist, which allows a first report to state which recommendations it covers and which it will add later.
Its main risks are physical: two plants are in areas exposed to flooding, and heat waves disrupt its California warehouse. Transition risks include carbon pricing in its supply chain and customers' demands for lower-carbon products. It describes how much revenue the exposed sites support, the insurance and flood defences it relies on, and its plan to add scenario analysis and targets in its next report.
What is the status of the SB 261 injunction?
Business groups challenged SB 253 and SB 261 as compelled speech. After a district court refused to block the laws, the Ninth Circuit on 18 November 2025 granted an injunction pending appeal for SB 261 only. On 1 December 2025, CARB issued an enforcement advisory saying it would not enforce the 1 January 2026 deadline and would set a new date after the appeal is resolved, and it opened a public docket where companies could submit reports voluntarily. The court heard oral argument on 9 January 2026. When this guide was checked, no decision had been issued and enforcement remained paused. If the injunction is lifted, CARB is expected to set a new deadline.
How does SB 261 differ from SB 253?
| SB 261 | SB 253 | |
|---|---|---|
| Revenue threshold | Over 500 million dollars | Over 1 billion dollars |
| What is reported | Climate-related financial risk and responses | Scope 1, 2 and later scope 3 emissions |
| How often | Every two years | Every year |
| Assurance | None | Limited, then reasonable, for scope 1 and 2 |
| Maximum penalty | 50,000 dollars a year | 500,000 dollars a year |
| Status | Paused by an injunction | In force; first reports due 10 November 2026 |
What are the fees and penalties?
CARB can impose administrative penalties of up to 50,000 dollars in a reporting year for failing to publish a report or publishing an inadequate one, and covered companies pay an annual fee to fund the programme. The penalty cap is a tenth of SB 253's, but the reputational cost of a missing or thin report is often greater, because lenders and customers read them. See SB 253 penalties and fees.
What should companies do while SB 261 is paused?
Keep preparing. Companies that already report under the TCFD, IFRS S2 or the ESRS can usually adapt that work, because SB 261 accepts those frameworks. Those starting from scratch should identify their main physical and transition risks, link them to revenue and assets, and set out governance and risk management. Physical and transition risks may also affect the financial statements, through impairment, useful lives and provisions. See climate risk in the financial statements and sustainability reporting explained.
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Questions people ask
Who must report under California SB 261?
US business entities with more than 500 million dollars of total annual revenue that do business in California, except insurance companies.
What does an SB 261 report contain?
Climate-related financial risk disclosed under the TCFD recommendations or an equivalent framework such as IFRS S2, and the measures adopted to reduce and adapt to it.
Is SB 261 in force?
It is law, but the Ninth Circuit paused enforcement on 18 November 2025 pending appeal, and CARB is not enforcing the January 2026 deadline.
How often are SB 261 reports required?
Every two years, with penalties of up to 50,000 dollars in a reporting year.
Sources
Every fee, date and rule on this page was taken from these official and primary sources.
- California Health and Safety Code section 38533 (SB 261, as amended by SB 219)
- Climate Case Chart: Chamber of Commerce v. California Air Resources Board, including the Ninth Circuit's November 2025 order
- California Air Resources Board: climate disclosure programme (SB 253 and SB 261)
- California Health and Safety Code section 38532 (SB 253, as amended by SB 219)
Rules and fees change. If you are reading this long after October 11, 2026, confirm the figures with the source before you rely on them.
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This guide is general information. It is not tax or legal advice for your situation.