California Climate Disclosure: What to Know About SB 253 and SB 261
August 13th, 2025California has passed two major climate disclosure laws: the Corporate Climate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261). The California Air Resources Board (CARB) is responsible for developing regulations for both, with final rules expected by the end of 2025. SB 253 requires large companies to disclose greenhouse gas (GHG) emissions, while SB 261 requires them to disclose climate-related financial risks.
Key Takeaways:
Two major laws: SB 253 (GHG emissions) and SB 261 (financial risk) impact large companies doing business in California.
Revenue thresholds: $1B+ for SB 253, $500M+ for SB 261.
Reporting starts 2026: Scope 1 & 2 GHG emissions (SB 253) and climate risk disclosures (SB 261). Scope 3 GHG reporting starts in 2027.
Penalties: No penalties in the first reporting year if companies show good faith efforts.
Parent-company level reporting allowed: Both laws permit consolidated reporting.
CARB is seeking public input: Regulations finalized by end of 2025, with opportunities for stakeholder engagement.
SB 253 – Corporate Climate Data Accountability Act:
Who is covered?
Companies doing business in California with over $1 billion in annual revenue. “Doing business” includes any financial transactions plus meeting at least one of these thresholds (2024, inflation-adjusted):
Organized or commercially domiciled in California
Sales over $735,019 (including through agents/contractors)
Real/tangible property over $73,502 or 25% of total property value
Compensation in California over $73,502 or 25% of total company compensation
Companies will be required to disclose Scope 1, 2, and 3 emissions. The first reporting year, 2026, will be Scope 1 and Scope 2 disclosures for 2025 emissions. Scope 3 reporting in 2027 will be based off 2026 emissions. There will not be penalties in 2026 if companies show a good faith effort to comply. Companies may use existing data for their initial emissions reports. CARB will set the schedule for Scope 3 disclosures beginning in 2027.
The Corporate Climate Data Accountability Act has the following timeline:
2026 – Scope 1 & 2 Emissions reporting begins. Limited assurance is required.
2027 – Scope 3 Emissions reporting begins for FY 2026 data.
2030 – Reasonable assurance is mandated starting in 2030. CARB will make a determination on assurance requirements for Scope 3 emissions.
Companies can report their emissions at the parent-company level. CARB’s initial concept is to leverage the Cap-and-Trade approach with corporate relationships. A corporate association is when one company has a degree of ownership or control over another company. If a level of ownership or control is 50% or greater, it requires the establishment of a Corporate Association under California’s Cap-and-Trade program.
SB 261 – Climate-Related Financial Risk Act:
The Climate-Related Financial Risk Disclosure will require companies doing business in California and have more than $500 million in annual revenues to publicly disclose their climate-related financial risks and the measures being taken to reduce/adapt to risks. The act encourages the reporting of climate-related financial risk disclosures using ISSB standards. Companies can report their climate-related financial risks at the parent-company level.
Climate-Related Financial Risk Disclosure are due in January 2026 and every two years thereafter. “Climate-related financial risk” includes material risks to operations, supply chains, investments, employee health, shareholder value, demand, and overall financial health from physical or transition risks.
Penalties will be determined on a company making a good faith effort to report. The good faith effort is part of CARB’s consideration for penalties. A company may be based on the best available information from 2023/2024 or 2024/2025.
The Future Roadmap:
CARB intends to create opportunities for public input over the summer and will develop the regulation by the end of the year. California plans to achieve a 40% reduction below 1990 emissions levels by 2030. Additionally, California wants to be carbon neutral and have an 85% reduction below 1990 levels by 2045. This has led to CARB requesting discussion on how it can best implement both laws:
How can CARB design a regulatory framework that supports iterative improvement in Scope 2 and 3 reporting? (SB 253)
Are current GHG protocol options for Scope 2 sufficient to meet California’s clarity standards in rulemaking? (SB 253)
Should/how should CARB think about developing materiality thresholds that focus Scope 3 emissions on the most significant emissions categories without undermining transparency? What factors should guide development of such materiality thresholds? (SB 253)
How should CARB implement SB 261? Regulation? Guidance?
What are lessons learned from the ongoing EU (or other international) experience(s) that CARB should be aware of? (SB 261)
Are there differences in how EU or other international regulators approach considerations such as clarity, enforceability, or flexibility that CARB should keep in mind? (SB 261)
Resources:
Need Help Getting Started?
If you’re a building owner in California, now is the time to get ready. The first reports are due in 2026, but waiting until the last minute can make the process far more stressful than it needs to be.
Touchstone IQ is offering free personalized demos to help property owners streamline their compliance efforts, identify cost-saving opportunities, and build a clear path toward decarbonization.
Schedule your free consultation today and turn this new regulation into your next competitive edge.
About the Author
Vincent Jasso is the Energy & Sustainability Policy Manager for Touchstone IQ. He holds a Juris Doctorate with a Certificate in Environmental, Natural Resources, and Energy Law from Colorado Law. He is also a graduate from the University of Arizona with degrees in Public Management & Policy and International Relations. Vincent has publications in Sustainability Science and the Arizona Journal of Environmental Law and Policy.