What's Happening?
The Ninth Circuit Court has temporarily halted the enforcement of California's SB 261, a climate-related financial risk disclosure law, following an appeal by the U.S. Chamber of Commerce and other business
groups. These groups argue that the law violates the First Amendment. SB 261 requires companies with annual revenues over $500 million that operate in California to publish biennial reports on climate-related financial risks. The court's decision comes as the California Air Resources Board (CARB) attempts to clarify the applicability and reporting requirements of both SB 261 and SB 253, another law mandating greenhouse gas emissions disclosures for companies with revenues exceeding $1 billion. CARB has acknowledged issues with its list of reporting entities and is revising its criteria for determining which companies are subject to these laws.
Why It's Important?
The Ninth Circuit's decision to pause SB 261 enforcement highlights ongoing legal and regulatory challenges faced by climate disclosure laws in the U.S. This pause affects companies operating in California, potentially delaying their compliance efforts and impacting the state's climate policy goals. The legal challenge underscores the tension between regulatory requirements and business interests, particularly concerning the scope and impact of climate-related disclosures. The outcome of this case could set a precedent for similar laws nationwide, influencing how states implement climate-related financial risk reporting and emissions disclosures.
What's Next?
The Ninth Circuit's injunction is pending an appeal, with oral arguments scheduled for January 2026. CARB is expected to continue refining its guidelines and definitions for compliance, including the criteria for 'doing business in California.' Companies affected by SB 261 and SB 253 are advised to monitor developments closely, as CARB may issue further guidance in response to the court's decision. The legal proceedings could lead to changes in the enforcement and scope of these laws, impacting corporate climate reporting practices.
