California SB 261 (Climate-Related Financial Risk Act)
SB 261 requires companies doing business in California with annual revenues exceeding $500 million to prepare and disclose climate-related financial risk reports aligned with TCFD recommendations, beginning in 2026.
While SB 253 focuses on emissions data, SB 261 targets climate-related financial risks. It requires covered companies to publish biennial reports describing their climate-related financial risks, the measures adopted to reduce and adapt to those risks, and how they assess and manage material climate risks. SB 261 is currently on pause pending legal review.
The law specifies that reports should align with the TCFD framework (now incorporated into ISSB S2), covering governance, strategy, risk management, and metrics/targets. The $500 million revenue threshold captures more companies than SB 253's $1 billion threshold.
Together, SB 253 and SB 261 create a comprehensive California climate disclosure regime: SB 253 covers emissions measurement and SB 261 covers risk assessment and strategic planning. Companies subject to both laws need integrated carbon accounting and risk management capabilities.
For companies already reporting under CSRD or CDP, much of the SB 261 content will overlap with existing disclosures. The key is having structured, consistent data and governance processes that can serve multiple reporting requirements from a single source of truth.
Frequently asked questions
Related terms
California SB 253 (Climate Corporate Data Accountability Act)
SB 253 is a California law requiring companies doing business in the state with annual revenues exceeding $1 billion to report Scope 1, 2, and 3 greenhouse gas emissions annually, beginning with Scope 1 and 2 for reporting year 2026 and Scope 3 for reporting year 2027.
TCFD (Task Force on Climate-related Financial Disclosures)
TCFD is a framework developed by the Financial Stability Board for disclosing climate-related financial risks and opportunities. It organizes recommendations around four pillars: governance, strategy, risk management, and metrics and targets. Though the TCFD disbanded in 2023, its framework lives on through ISSB S2 and CSRD/ESRS.
CSRD (Corporate Sustainability Reporting Directive)
The Corporate Sustainability Reporting Directive (CSRD) is the European Union's mandatory sustainability reporting law. It requires companies operating in the EU above certain thresholds to disclose environmental, social, and governance (ESG) information according to the European Sustainability Reporting Standards (ESRS), with third-party assurance.
Carbon Accounting
Carbon accounting is the systematic process of measuring, recording, and reporting the greenhouse gas (GHG) emissions produced by an organization, product, or activity. It follows standardized methodologies — most commonly the GHG Protocol — to quantify emissions across Scope 1 (direct), Scope 2 (purchased energy), and Scope 3 (value chain) categories, producing an auditable inventory that underpins disclosure, reduction planning, and regulatory compliance.