CARB Delays Enforcement of California’s Climate-Related Financial Risk Report Law (SB 261) and Issues New Guidance on Climate Disclosure Requirements in SB 261 and SB 253

As we have reported previously, California has enacted a pair of climate-related reporting laws that apply to large entities doing business in California (SB 253 and SB 261, as modified by SB 219). This alert provides an update on only the most recent events; please see previous alerts for a broader overview of the laws’ requirements.

On November 18, 2025, CARB conducted the latest in a series of workshops updating the public regarding its rulemaking process and answering questions about the laws’ implementation. Ahead of the workshop, CARB updated its FAQs for both laws, and its checklist for the first climate-related risk reports. On November 21, CARB posted an updated version of its workshop slides, first presented during the November 18 workshop. The recording of the workshop is now available here.

While that workshop was underway, the Ninth Circuit stayed enforcement of SB 261 (requiring climate-related financial risk reports of U.S.-based entities doing business in California with revenue over $500M by January 1, 2026) against the plaintiffs—major national and state trade associations—and their members, pending appeal. However, the absence of any reasoning from the Ninth Circuit in issuing this preliminary injunction left unclear how CARB should proceed. This is particularly true given that likelihood of success on the merits is a prerequisite to obtain a preliminary injunction, and the case raises facial First Amendment claims, which if successful would doom the laws in their entirety. Significantly, however, enforcement of SB 253 has not been enjoined.

CARB spent the better part of two weeks silent regarding how it intended to proceed. But on December 1, 2025, CARB issued an Enforcement Advisory providing the following:

“In light of the Court’s order, CARB will not enforce Health and Safety Code section 38533 against covered entities for failing to post and submit reports by the January 1, 2026, statutory deadline. CARB will provide further information—including an alternate date for reporting, as appropriate—after the appeal is resolved.

For entities that may choose to report voluntarily at this time, CARB will open a docket starting December 1, 2025, as CARB indicated in its November 18, 2025, workshop.”

For those who choose to voluntarily comply, CARB’s docket can be found here. CARB asks that companies post both a statement on company letterhead and a link to where the report can be found on the company’s website.

Other important updates from CARB include the following:

Applicability

• CARB refers to Tax Code § 23101(a) to define “doing business” in California to mean “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit” and, during any part of a reporting year, either (i) being organized or commercially domiciled in California or (ii) having sales in California exceeding an inflation-adjusted threshold ($735,019 for 2024). CARB announced in the November 18 workshop that it was omitting the additional criteria in Sections 23101(b)(3) and (4) relating to property holdings and payroll, noting that in-scope entities “should have significant economic nexus within the state of California.”
• CARB reiterated the importance of each entity, whether a parent or a subsidiary, undertaking its own analysis of whether it comes within the scope of the laws because “[p]arent-subsidiary relationships do not determine which entities are regulated.” Regarding how to determine whether an entity qualifies as a parent or subsidiary, CARB refers to the Cap-and-Invest program’s definition at Title 17, California Code of Regulations, § 95833.
• CARB posted two flowcharts in the FAQ document purporting to address “Common Parent-Subsidiary Questions” which provide an indication of how CARB anticipates entities will evaluate their potential coverage under the laws.
• CARB provided additional detail regarding its interpretation and proposed application of the laws with regard to excluded entities, such that the following entity types would not be included: (1) “Non-profit or charitable organizations, defined as tax-exempt under the Internal Revenue Code.” (2) “Entities whose only business in California is the presence of teleworking employees.”

SB 261

• CARB updated its compliance checklist, adding further detail, including that the disclosures should describe the processes for identifying, evaluating, and addressing climate-related risks, even if no material risks have been identified; and encouraging the disclosures to include a description of gaps/limitations/assumptions.
• When choosing and implementing reporting frameworks, CARB states “[i]f industry-specific guidance exists, covered entities should follow the guidance, as applicable, to ensure that the disclosed information is relevant.”

SB 253

• CARB is now planning to propose that the first reporting deadline will be August 10, 2026.
• CARB provided an interpretation of its December 2024 enforcement notice as meaning:

“Entities that were not collecting data or were not planning to collect data, at the time the Enforcement Notice was issued, are not expected to submit Scope 1 and 2 reporting data in 2026. Such entities should submit a statement on company letterhead to CARB, stating that they did not submit a report, and indicating that in accordance with the Enforcement Notice, the company was not collecting data or planning to collect data at the time the Notice was issued.”

Fees for Both Laws

• CARB confirmed that it will collect a flat fee from regulated entities to cover the annual ongoing cost of implementing SB 253 and SB 261 . The exact amount to be assessed in 2026 remains pending while CARB responds to stakeholder feedback regarding the covered entities list published in August 2025.
• CARB will formally establish the fee program as part of the initial rulemaking anticipated in Q1 2026. CARB proposes to assess these fees on September 10, 2026.

In sum, the continued legal uncertainty surrounding these laws is complicating compliance efforts on multiple fronts. For now, SB 253 remains in effect, and SB 261 could still survive its merits challenge resulting in the lifting of the injunction, so entities potentially subject to the laws should carefully review the latest CARB updates along with their counsel to determine any impact on plans for compliance.