Court of Appeals Pauses California Climate Disclosures

The Court of Appeals for the Ninth Circuit has issued an order temporarily blocking implementation of California Senate Bill 261 (SB 261).  SB 261, the Climate-Related Financial Risk Act, requires U.S. public and private entities with annual global revenue exceeding $500 million that do business in California to disclose their climate-related financial risks and the measures they are taking to reduce and adapt to those risks. See California Outflanks the SEC on Climate Disclosure, October 2023 Update. The first reports under this law are due January 1, 2026, although the court’s order suspends that deadline.

The U.S. Chamber of Commerce and other plaintiffs challenged the validity of SB 261, and its companion legislation, Senate Bill 253 (SB 253), on First Amendment and other grounds. The district court held that, while both statutes regulate commercial speech, the plaintiffs had not established that they were likely to succeed in showing the laws are unconstitutional and refused to enjoin their enforcement.  See California Climate Disclosure Laws Survive a Challenge, September 2025 Update.  Plaintiffs appealed that decision to the Ninth Circuit, which granted an injunction against enforcement of SB 261 pending its decision on whether to reverse the district court’s order.  The Court of Appeals will hear oral argument on January 9, 2026.

While the Court of Appeals agreed to pause SB 261, it declined to enjoin SB 253, the Climate Corporate Data Accountability Act.  SB 253 requires U.S. entities with annual global revenue exceeding $1 billion that do business in California to report their Scope 1, 2, and 3 greenhouse gas (GHG) emissions. The due date for initial GHG reporting under SB 253 is August 10, 2026.  Presumably, the Court of Appeals will issue its decision on the appeal from the district court’s refusal to enjoin either of the laws prior to August 10.

Coincidentally, on the same day that the Court of Appeals enjoined enforcement of SB 261, the California Air Resources Board held a public workshop to address various issues concerning the implementation of SB 253 and SB 261.  Among other things, CARB announced during the workshop proposals on the definition of “doing business in California” for purposes of SB 253 and SB 261 and on the ability of parents and subsidiaries to file consolidated reports.  CARB’s PowerPoint presentation at the workshop, updated FAQs regarding compliance with SB 253 and SB 261, and a final SB 261 compliance checklist are available online.

On December 1, CARB issued an Enforcement Advisory stating that – as the court order requires -- it will not enforce SB 261 against entities that fail to post and submit reports by the January 1, 2026, statutory deadline.  CARB said that it “will provide further information—including an alternate date for reporting, as appropriate—after the appeal is resolved.” CARB has also issued instructions for companies that choose to submit reports voluntarily.

The Court of Appeals' temporary injunction creates considerable uncertainty for companies that are subject to SB 253 and SB 261 reporting.  Most companies subject to SB 261 have probably finalized or are near finalizing their reports.  Those companies now face a choice between going ahead with the disclosure voluntarily or waiting to see what happens next in the ongoing litigation. Companies subject to GHG emissions disclosure under SB 253 will need to continue preparing to file their first reports by August 10, 2026, as that deadline remains in effect. However, either the Court of Appeals or CARB may alter or suspend that date.  Audit committees of companies subject to California’s climate disclosure requirements should explore whether management has processes in place to collect the information needed to comply and, if so, how best to proceed, considering the Court of Appeals injunction.