Yesterday, CARB published these FAQs that address recurring questions regarding the implementation of SB 253 (greenhouse gas emissions disclosure) and SB 261 (climate-related financial risk disclosure), as amended by SB 219. While the FAQs largely reiterate what we have learned to date from CARB or otherwise, certain information regarding SB 261 was imparted for the first time in these FAQs, including the following (emphasis added):
4. When do the first climate-related financial risk reports need to be submitted, per Health and Safety Code § 38533?
Per Health and Safety Code § 38533, the Climate-related Financial Risk Reporting Program, covered entities must prepare and publish their first climate-related financial risk report by January 1, 2026, and biennially thereafter.
On December 1, 2025, CARB will post a public docket for covered entities to post the location of their public link to their first climate-related financial risk report. CARB will keep this public docket open until July 1, 2026. This public docket will help support transparency by providing one location for the public to be able to review all climate risk reports.
This guidance is intended to assist companies with initial planning for January 1, 2026. Future regulations may establish additional or alternative requirements consistent with Health and Safety Code § 38533.
5. Health and Safety Code § 38533 references use of reporting frameworks, such as the Task Force on Climate-related Financial Disclosures (TCFD). How should an organization determine what needs to be included in our climate-related financial risk report?
Health and Safety Code § 38533(a)(2) defines “Climate-related financial risk” as material risk of harm to immediate and long-term financial outcomes due to physical and transition risks, including, but not limited to, risks to corporate operations, provision of goods and services, supply chains, employee health and safety, capital and financial investments, institutional investments, financial standing of loan recipients and borrowers, shareholder value, consumer demand, and financial markets and economic health. Health and Safety Code §38533(b)(1)(A) further directs covered entities to prepare a climate-related financial risk report.
Health and Safety Code § 38533 allows but does not mandate the disclosure of information that falls outside of this definition.
The statute specifies some flexibility in choosing a reporting framework, and entities then apply the principles embedded in that chosen framework.
For example, TCFD 2017 states “organizations should determine materiality for climate-related issues consistent with how they determine the materiality of other information included in their financial filings.” Further, the TCFD emphasizes that disclosures should be specific, complete, and provide sufficient information to enable users to understand the impact of climate-related issues on an organization's business.
As part of its public outreach, CARB has heard from stakeholders that climate risk-related data is often collected on a fiscal year basis and that it takes time to process climate information into a report. As a result, it is reasonable to expect that initial climate-related financial risk reports submitted by January 1, 2026, may cover fiscal years (FY) 2023/2024 or FY 2024/2025 depending on the organization.
This guidance is intended to assist companies with initial planning for their January 1, 2026 report submittals. Future regulations may establish additional or alternative requirements for future report submittals, consistent with Health and Safety Code § 38533.
6. Health and Safety Code § 38533 makes reference to companies making ‘good faith efforts’ to comply. What does that mean?
As outlined in Health and Safety Code § 38533, potential penalties against entities for violations are tied to several factors, including whether the violator took good faith measures to comply and when those measures were taken. This “good faith” consideration is part of CARB’s enforcement discretion in considering penalties for reporting violations.
To provide a phase-in period for reporting, climate-related financial risk disclosures made pursuant to the upcoming statutory deadline (January 1, 2026) may be based on the best available information, including information from fiscal years 2023/2024 or 2024/2025 (see above). CARB also recognizes that data quality and data sources may change over the course of the year, if additional data collection methods were put in place later.
The Society continues to engage with CARB on these and other implementation- and compliance-related matters. If you would like to join the ~65-member working group, please email Randi Morrison.