Blog

[UPDATED OCTOBER 2025] One of the hottest topics in corporate sustainability right now is the passing of California’s Corporate Climate Disclosure Laws. If you follow Green Econome, then you probably read about SB 253, which focuses on corporate contributions to GHG emissions.

On the other hand, SB 261 requires large corporations to report their climate-related financial risk. As with our previous post, we will discuss who is impacted by it, and what exactly they are expected to do.

If you haven’t yet, I highly suggest checking out our Guide to Updates to California’s Climate Disclosure Laws.

What’s the Purpose of SB 261 and Who Needs to Report?

This bill was prefaced with the following assumptions:

• Climate change is impacting California’s communities and economy.
• Global leaders have established that long-term economic strength is dependent on an economy’s ability to withstand climate-related risks.

The state decided to pass SB 261 to improve transparency amongst businesses that operate in California and their preparedness for the impacts of climate-change.

Covered entities are businesses that operate in California and had more than $500 million in revenue in the prior fiscal year. As with SB 253, this revenue figure applies to the entire business, not just the business it does in the state.

Here’s the Specifics of SB 261

Covered entities are expected to report in accordance with the framework outlined by the Task Force on Climate-related Financial Disclosures (June 2017). These guidelines ask companies to report on their exposure to climate-related financial risks and what tactics they are implementing to reduce those risks.

The first report will be on or before January 1, 2026 and biennially moving forward. The report must be publicly accessible (via corporate website, or other means).

Additionally, the state board will contract with a climate reporting organization to prepare a report that reviews a subset of the risk reports and analyzes the systemic and sector-wide climate-related financial risks in California.

Much of the language in SB 261 left the door open for the state to further develop these regulations and define what must be reported. The resulting companion bill, SB 219, allows CARB to act as a reporting organization, rather than delegating it to a third party if they choose to.

Additional Points to Consider

For larger businesses, they only need to report on the parent company level. Each of its subsidiaries are not expected to report individually. Also, for any business that is subject to regulation by the Department of Insurance, they are not expected to report. If any covered entity does not complete a report consistent with the required disclosures, they need to complete a report to the best of its ability and provide a detailed explanation for reporting gaps.

What is the Cost to Comply?

Maybe the better question is what is the cost to everyone if companies don’t comply? But as for the law, there are associated fees due when filing the report. While the bill does not define the amount, it specifies that it will be, “an amount adequate to cover the state board’s full costs of administrating and implementing this section”. Any proceeds will go to the Climate-Related Financial Risk Disclosure Fund, which will continuously be appropriated toward purposes of the bill. Failure to report may impose a penalty of up to $50,000 in a reporting year.

How to Prepare

It is essential that businesses work on their data collection immediately and engage with reporting experts. If you are looking to further your emission reductions and save on operating costs, please reach out.

Green Econome, a woman-owned, full-service energy and water efficiency construction and consulting company, has over 20 years of combined experience. We can help explain these complicated tax benefits and make sure your property is getting the most from them. Furthermore, we can recommend solutions that will increase the NOI of your property and increase market value. Feel free to reach out to Green Econome’s founder and CEO, Marika Erdely, at marikae@greeneconome.com.