What Is SB 261?

Senate Bill 261 — passed in 2023 — requires large companies operating in California to publicly disclose climate-related financial risks and explain how they’re addressing them.

Unlike emissions-focused regulations (like SB 253), SB 261 focuses on the economic impact of climate change on the company itself — including both physical risks (like wildfires and floods) and transition risks (like policy changes, stranded assets, and customer shifts).

Which Companies Must Comply?

This applies to both U.S. and non-U.S. companies if they meet the revenue and presence thresholds.

What Is a Climate-Related Financial Risk Report?

Companies must prepare a public-facing, biennial report covering:

1. Identification of climate-related financial risks
2. Actions and strategies to mitigate or adapt to those risks
   

The definition of “climate-related financial risk” is broad. It includes material risks to operations, supply chains, employees, customers, capital investments, and market valuation — caused by climate impacts or the transition to a low-carbon economy.

Reporting Standards: TCFD, IFRS S2, or Equivalent

SB 261 aligns with globally recognized standards:

• Primary framework: Task Force on Climate-related Financial Disclosures (TCFD)
• Also accepted: IFRS Sustainability Disclosure Standards (IFRS S2)
• Equivalents allowed: SEC climate disclosure rules (once finalized), other government mandates
  

The report must include TCFD’s four pillars:

Disclosure Timeline and Publication Requirements

Companies must submit their report to a state-designated climate reporting organization, which will produce an independent biennial review of public disclosures.

Penalties and Enforcement

Companies must also pay an annual administrative fee to fund state oversight. Fee amounts will be published by CARB and adjusted annually for inflation.

How to Prepare: A Practical Path for Risk and Compliance Teams

1. Identify your exposure

• Use climate scenario tools to map physical and transition risks
  
• Focus on geographies, asset classes, energy dependencies, and critical suppliers
  

2. Align governance

• Assign board-level oversight
• Define internal responsibility and budget for climate risk
  

3. Choose your reporting framework

• Use TCFD now, but prepare for convergence with ISSB or SEC standards
• Document assumptions and gaps
  

4. Map risk to financial outcomes

• Consider how risks impact cash flow, margins, asset values, insurance, and access to capital
  

5. Build reporting infrastructure

• Centralize climate data collection
• Tag risks by business unit and geography
• Version-control your reports for public publication
  

6. Get ready for transparency

• SB 261 disclosures are public — they will be read by investors, customers, and regulators
• Treat them as part of your reputation and risk narrative
  

Sprih’s Support for SB 261 Disclosures

Sprih works with large enterprises to:

• Align existing ESG and risk processes with SB 261’s requirements
• Structure TCFD- or ISSB-based reports with investor-grade clarity
• Create crosswalks between SB 253, SB 261, and CSRD/SEC formats
• Map risks across business lines, suppliers, and financial statements
• Maintain a defensible audit trail and publishing-ready reports

Our platform is already supporting global companies preparing for dual compliance across jurisdictions.