What Is SB 261?

SB 261 California is part of the state’s Climate Accountability Package, requiring large companies to publicly disclose climate-related financial risks and explain how they’re managing them.

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 SB 261?

You need to comply with SB 261 California 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?

SB 261 defines it as material risk of harm to short- or long-term financial outcomes due to either:

• Physical risks (e.g. wildfires, flooding, extreme heat)
• Transition risks (e.g. carbon pricing, regulatory shifts, changing customer demand)
  

This includes risks to:

• Operations and supply chains
• Employee health and safety
• Capital assets and investments
• Customer demand and revenue
• Borrower or client creditworthiness
• Market stability
  

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 to meet SB 261 California compliance requirements.

When Do You Need to Report?

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:

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

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.

Ready to assess your climate risk strategy?

Talk to our climate expert to get started on your compliance journey.