California’s SB 261, passed in 2023 as part of California’s Climate Accountability Package, requires large companies to publicly disclose climate-related financial risks and explain how they’re managing those risks.
This isn’t about carbon emissions. It’s about the financial impact of climate change—and whether your company has a strategy to survive it.
SB 261 focuses on long-term business resilience in a world shaped by wildfires, heatwaves, regulatory shifts, and decarbonization pressure.
It’s modeled after the Task Force on Climate-related Financial Disclosures (TCFD), the global benchmark for climate risk reporting.
Who Must Comply with California’s SB 261?
You need to comply if your business:
Has more than $500 million in total annual revenue, and
Does business in California, even if it’s headquartered elsewhere
This includes public and private companies across industries—unless you’re in the business of insurance, in which case you’re exempt.
A few important notes:
SB 261 applies to parent companies and subsidiaries
If a parent company discloses risk at the group level, a qualifying subsidiary doesn’t need to file separately
The law covers U.S.- and non-U.S.-based firms as long as they operate in California
What Is Climate-Related Financial Risk?
California’s SB 261 defines it as material risk of harm to short- or long-term financial outcomes due to either:
In short: if climate change could impact your cash flow, value chain, or investor relationships, you need to address it.
What Does the SB 261 Report Include?
By January 1, 2026, companies must publish a climate-related financial risk report that covers:
The climate-related financial risks your business faces
How you’re reducing or adapting to those risks
Alignment with the TCFD framework or an equivalent standard
If you can’t provide all the required information, you must:
State which sections are incomplete
Explain why the data isn’t available
Describe how and when you plan to fill the gaps
Reports must be publicly accessible on your company website.
When Do You Need to Report?
Date
Requirement
January 1, 2026
First SB 261 report due (published on company website)
Every 2 years
Ongoing biennial disclosure cycle
There’s no assurance requirement (yet), but expect increasing scrutiny from investors, boards, and regulators over time.
The California Air Resources Board (CARB) will also review company reports and publish its own findings every two years.
What Frameworks Does SB 261 Use?
SB 261 relies on the TCFD framework, which is organized around four key pillars:
Pillar
Focus Area
Governance
Board and management oversight of climate-related risks
Strategy
How climate risks/opportunities affect your business model
Risk Management
Processes to identify, assess, and manage climate risk
Metrics & Targets
How you measure and monitor climate-related impact
You can also comply using ISSB (IFRS S2) standards, or equivalent government-mandated frameworks that meet TCFD-level disclosure requirements.
What Are the Penalties for Non-Compliance?
SB 261 gives CARB the authority to penalize companies that:
Fail to publish a report
Publish a report deemed “inadequate” or “insufficient”
Maximum penalty: $50,000 per reporting year
The state will consider whether the company acted in good faith—i.e., made an effort to comply, disclosed limitations, and planned improvements.
How SB 261 Compares to Other Climate Disclosure Laws
Requirement
SB 261
SB 253
SEC (Proposed)
CSRD (EU)
Applies to
Revenue > $500M
Revenue > $1B
Public companies
Companies meeting EU thresholds
Focus
Climate-related financial risk
GHG emissions
Both (proposed)
ESG risks & impacts
Standard
TCFD
GHG Protocol
TCFD + GHG
ESRS (EU Sustainability Standards)
Frequency
Biennial
Annual
Annual (proposed)
Annual
Scope 3 Required?
No
Yes
Possibly
Yes
SB 261 is focused and strategic. It doesn’t duplicate SB 253 or CSRD—it complements them.
How Sprih Can Help
Sprih supports companies preparing for SB 261 through:
Climate risk mapping across physical and transition dimensions
Customizable templates aligned with TCFD and ISSB S2
Collaboration tools to involve legal, risk, and sustainability teams
Integration with existing emissions data and scenario analysis
Readiness reviews and gap assessments for board visibility
You don’t need to start from scratch. We’ve already helped businesses in logistics, real estate, and food sectors prepare actionable, investor-ready reports that meet SB 261 expectations.
FAQs
What is SB 261 in California?
SB 261 is a climate risk disclosure law that requires companies with over $500 million in annual revenue doing business in California to publish reports on their climate-related financial risks and the strategies they’re using to manage them.
Is SB 261 only for public companies?
No. The law applies to both public and private companies, as long as they meet the revenue threshold and do business in California. Insurance companies are the only exempt group.
What if my company isn’t based in California?
Location doesn’t matter. If your company meets the revenue requirement and operates in California—even as a subsidiary—the law applies. Global firms are very much in scope.
Do I need to calculate emissions under SB 261?
No. Emissions disclosures are covered under SB 253. SB 261 focuses strictly on climate-related financial risks—both physical and transition—and your plans to manage or adapt to them.
Do I need third-party assurance for SB 261?
Not yet. There’s currently no mandate for assurance, but your report must be public, complete, and aligned with the TCFD framework or equivalent. Expect scrutiny from regulators, boards, and investors.
