California SB 261 — Climate-Related Financial Risk Act

California SB 261 requires companies with total annual revenues exceeding $500 million that do business in California to prepare and publish biennial reports disclosing climate-related financial risks and the measures they are taking to reduce and adapt to those risks. The disclosure framework is aligned with the Task Force on Climate-related Financial Disclosures (TCFD), covering governance, strategy, risk management, and metrics and targets.

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The Ninth Circuit Court of Appeal has paused enforcement of the January 2026 deadline while legal challenges to the law proceed. This pause does not repeal SB 261 or render it inapplicable — it suspends enforcement pending litigation resolution. The law remains on the books, and companies that have already invested in TCFD-aligned disclosure infrastructure are not at risk of having wasted that effort.

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SB 261 matters beyond California. TCFD alignment is now embedded in the EU's Corporate Sustainability Reporting Directive (CSRD), the ISSB's IFRS S2 standard, and multiple national mandatory frameworks. Building a TCFD-compliant disclosure process simultaneously satisfies multiple regulatory requirements. Companies that treat SB 261 as an isolated California compliance exercise are missing the broader signal: climate financial risk disclosure is becoming a baseline expectation across every major jurisdiction.

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Companies should continue TCFD-aligned preparation regardless of the enforcement pause. If the Ninth Circuit rules in favor of the law, enforcement will resume — and the companies with documentation and processes in place will be in a materially better position than those that waited.