Prepare for California Climate Requirements: Insights from Legal, Policy, and Sustainability Experts

This blog post will be updated as new information becomes available. Last updated as of July 2, 2025.

California has adopted legislation that will require U.S. entities with annual total revenues greater than $500 million, and doing business in the state, to publish a climate-related financial risk report by January 1, 2026, and biannually thereafter. Later in the year, U.S. entities doing business in the state with annual total revenues greater than $1 billion will be required to begin reporting greenhouse gas emissions. Is your company prepared to meet these requirements? 

California Climate Legislation: The Current Landscape

As the world’s fourth largest economy, California’s climate policies will add new layers of complexity for public and private reporting companies across the globe. To better understand the requirements, below is a breakdown of the Climate-Related Financial Risk Act (SB-261) and Climate Corporate Data Accountability Act (SB-253).
 

*CARB has yet to define “doing business in California” but have proposed leveraging the California Tax and Revenue Code approach.

To speak to some of the complexities around the California climate laws, Nasdaq recently hosted a webinar, Climate Risk: How is California’s SB-261 impacting resilience & adaptation planning? Sustainability professionals Natasha Tuck, Director of Sustainability and ESG at Dolby, Michael Littenberg, Partner, and Global Head of the ESG, CSR, Business and Human Rights Compliance Practice at Ropes at Ropes & Gray, and Bob Languell, Manager of the Corporate Climate Data Fee Implementation and Enforcement Support Section of CARB, shared their insights about the current legislative landscape.

What’s Known About SB-261 

According to a poll conducted during the webinar, only 30% of respondents considered themselves ‘very familiar’ with SB-261, with the majority (68%) indicating they were ‘somewhat familiar’ or ‘had heard of the regulation, but didn’t know the details.’ Companies are looking to better understand the California climate legislation requirements.

Languell noted his comments in the webinar are “initial staff concepts” that will be clarified in future guidance. He acknowledged some of the impractical elements of acquiring and reporting on 2025 emissions data on January 1, 2026, and shared that CARB is “working hard to provide guidance” around SB-261 considering this deadline. Languell shared that supporting materials and FAQ documents are coming soon to help companies understand how to comply with California’s existing statute. For SB-253, the date for CARB to release updated regulations as outlined in the amendment bill SB-219 has passed (July 1, 2025); CARB continues in the pre-regulatory stage of regulation. 

Languell also advised companies to do their best, noting that the “good faith effort [that] was originally issued in an enforcement memo for 253 [is] realistically going to also extend to 261.”  At this time, staff believe that inaccurate or incomplete reporting for 2026 will not be penalized if done in ‘good faith.’ However, failure to publicly disclose reports online could mean a fine of up to $50,000 per year. 

Littenberg further explained the status of SB-261, “it’s no longer a bill… it’s very much a live piece of legislation.” The mandate is not being put on hold despite pending litigation. He noted that the pending lawsuit is widely expected to be resolved after the first reporting deadline, reinforcing the need for disclosure preparedness. 

Barriers to Effective Sustainability Reporting 

In the same webinar poll, nearly 50% of respondents indicated the biggest compliance challenge they are facing is interpreting regulatory requirements, followed by data availability and quality and internal expertise (18%). Other potential hurdles for effective reporting include needing to comply with multiple policies and having to do so in a short period of time. 

When asked if he thought the 2026 timeline was achievable for most companies, Littenberg said generally yes, as SB-261 is effectively a comply or explain statute. He paraphrased the requirements and indicated “If you haven’t done all the work to report in full, you can explain the reporting gaps and what you’re planning on doing to provide complete disclosures for the next reporting cycle.” 

Languell also assuaged concerns about navigating multiple disclosures, indicating that if companies have a standard that they are already using, such as TCFD, ISSB, or other voluntary frameworks listed in the statute, then CARB will accept that format. 

How Companies Can Prepare for the Reporting Deadline

To stay on track to disclose in 2026, the webinar panelists agreed that having a clear compliance strategy with good oversight, defined roles and responsibilities, mapped milestones, and achievable goals will help companies deliver their reports on time and set a solid foundation for demonstrating future progress. They also agreed that it is important that everyone involved in reporting understands the statute, ensuring leaders and individual contributors manage their work appropriately.

Tuck shared that her team’s approach is to combine efforts and leverage their climate risk scenario analysis and financial impact work done in alignment with TCFD for SB-261 disclosures. The work companies may already be doing to prepare for CSRD, like improving data quality and processes, will also support teams in feeling more confident and prepared for disclosure. 

Tuck also recommended that companies condense timelines as much as possible and keep diligent records of traceable data. Beyond satisfying reporting requirements, accurate and verifiable data will be key in conversations with executives and future audits. Moreover, to help speed up data gathering and drafting, Tuck suggested leveraging technology that can help complete the bulk of the work for companies. Ultimately, she shared that “action is the antidote to anxiety” and teams shouldn’t let perfection be the enemy of progressing toward and meeting the deadline with their best effort.

For companies looking for additional guidance, CARB’s website provides the latest information. In addition, a gap assessment is another way companies can better understand their climate risks and reporting readiness for TCFD-aligned California disclosures by analyzing key themes like strategy, governance, risk management, and metrics.

The Right Partner and Technology Can Help Simplify Reporting

Today’s climate regulations are complicated, and the deadline is approaching fast. Together with solid data governance and sound reporting strategies, investing in the right sustainability solutions can help companies meet the SB-261 reporting deadline. In addition, engaging with the right partner can help teams assess their climate risks and improve their reporting strategies overtime. 

Nasdaq offers a suite of tools and advisory services to help companies navigate key compliance activities and adapt to evolving climate legislation: 

• Nasdaq Sustainable Lens®, Nasdaq’s sustainability intelligence platform, harnesses the power of AI to help companies perform instant gap assessments against International Financial Reporting Standards S2 (IFRS S2) and TCFD requirements, which can help gauge preparedness for SB-261 and generate first drafts of disclosures.
• Nasdaq Metrio™ is Nasdaq’s end-to-end sustainability data management and reporting platform. Companies can collect granular sustainability data, automate survey workflows, and manage compliance with multinational taxonomies like TCFD, IFRS S2, and SB-261, among others. Nasdaq Metrio can collect and disclose Scope 1, 2, and 3 emissions, further enhancing data collection and workflow control.
• The Nasdaq Sustainability & Climate Advisory team helps companies identify material climate-related financial risks and outline mitigative actions through research, expert interviews, and leadership workshops. Clients receive a Climate Risk & Opportunity Disclosure draft aligned with the TCFD framework and SB-261, which summarizes these insights and can support teams as they complete Climate Risk Assessments.

To learn more about how Nasdaq Sustainability Solutions supports companies throughout their sustainability journeys, visit our website or get in touch today.

The views and opinions expressed herein are the views and opinions of the authors and panelists and do not necessarily reflect those of Nasdaq, Inc.