Early trends from the first SB 261 reports

California’s climate accountability laws, SB 261 and SB 253, represent a significant step in making climate disclosures a baseline expectation for corporations. SB 261, the Climate-Related Financial Risk Act, requires U.S.-based companies doing business in California with over $500 million in total annual revenue to disclose their climate-related financial risks and opportunities. While mandatory disclosures are currently not being enforced due to ongoing litigation, this analysis examines 154 reports that were voluntarily submitted to the public docket as of early May 2026. These requirements aim to help companies identify risks, enhance transparency, and provide valuable information to stakeholders.

Value of assessing voluntary SB 261 reports

The analysis serves three primary purposes: establishing a baseline of early reporting practices, translating principles-based requirements from the California Air Resources Board (CARB) into measurable indicators, and documenting emerging practices that exceed minimum requirements. The filing of 154 voluntary reports despite litigation delays is viewed as a positive sign of corporate commitment. While early filers may not be perfectly representative of all in-scope companies, their behaviour identifies trends that others can use to inform their own reporting.

Research methodology

Researchers used the Task Force on Climate-related Financial Disclosures (TCFD) and IFRS S2 guidance to translate CARB’s requirements into measurable indicators. An AI analysis tool was developed to extract specific data points from each individual report, which were then manually reviewed by analysts for completeness and accuracy. The research incorporates case studies featuring direct quotations from anonymised company reports to illustrate industry-wide patterns and methodological insights rather than individual corporate performance.

The companies voluntarily reporting via CARB’s public docket

The cohort of 154 companies represents all 11 SASB sector classifications and includes both public and private entities. Notably, a higher percentage of private companies (53%) filed reports compared to public companies (45%). This suggests that SB 261 is successfully leading to new or improved reporting by a wider range of organisations beyond those typically facing high investor pressure. The most represented sectors include Resource Transformation (18%), Health Care (15%), and Technology & Communications (15%).

Reporting methods and frameworks

Companies used various reporting methods, with 52% (80 of 154) creating standalone SB 261 reports. Other methods included standalone TCFD reports (23%) and sustainability reports (14%). Regarding frameworks, 89% of reporters aligned with TCFD in some manner. IFRS S2, which builds upon TCFD, had a smaller share of 7%, though this is expected to grow as disclosures mature. Most companies shared a common thread in structuring reports around governance, strategy, risk management, and metrics and targets.

Governance

Board-level oversight of climate-related issues is nearly universal, appearing in 92% of reports. Structure varies: 49% use existing committees with delegated remits, while 10% have dedicated sustainability or ESG committees. Management-level oversight was disclosed by over 80% of reporters, with 53% reviewing climate issues at least monthly, quarterly, or semiannually. Frequent reviews suggest climate is treated as a live business consideration that can be monitored and responded to as conditions change.

Strategy

Over 90% of reporters identified specific climate-related physical risks, transition risks, and opportunities. The top physical risks identified were flooding, storms, and extreme heat, while top transition risks included policy/regulatory changes and market demand. Despite high risk awareness, only 12% of companies disclosed a formal transition plan. Furthermore, while 80% referenced financial impacts, only 12% explicitly integrated them by assigning dollar figures or quantifying asset loss and disruption ranges.

Risk management

Companies employ a mix of strategies to identify and assess risks, including internal workshops, third-party tools, and geospatial analysis. While 66% utilised qualitative scenario analysis, only 9% conducted quantitative analysis. Integration into enterprise risk management (ERM) is also evolving; 78% of companies reported at least partial integration, though many have yet to build climate considerations into their core systems and ‘three lines of defence’ frameworks.

Metrics and targets

Although SB 261 does not explicitly require greenhouse gas (GHG) emissions disclosures, many companies included them in anticipation of SB 253 requirements. 62% disclosed Scope 1 and 2 emissions, and 47% disclosed Scope 3. Additionally, 21% of companies had emissions reduction targets validated by the Science Based Targets initiative (SBTi), reflecting market expectations for quantitative data even when not strictly required by the specific law being addressed.

G&A closing thoughts

The first group of voluntary disclosures shows a broad range of maturity, from early acknowledgment to advanced financial modelling. There is no single profile of an early reporter, and quality varies significantly within sectors. As mandatory compliance takes effect, the reporting landscape is expected to become more representative. Companies deriving the most benefit are those using the reporting process as a catalyst to refine internal capabilities and risk assessments.

Ceres closing thoughts

SB 261 is critical for investors as California is one of the world’s largest economies. Leading disclosures are already differentiating themselves through stronger governance, explicit financial modelling, and concrete transition plans. Meeting minimum requirements is the starting point, but the market has moved beyond the question of ‘whether’ to disclose toward ‘how’ useful and financially relevant those disclosures are to stakeholders.

Looking ahead

Companies are encouraged to use these findings to benchmark their current disclosures against both CARB’s requirements and emerging practices. Investors should use the data to distinguish between the presence of disclosure and its decision usefulness. Regulators and standard setters should monitor how reporting practices evolve across different sectors to determine if additional implementation guidance is necessary to produce consistent and comparable information.