California Climate Reporting Legal Update

On January 9, 2026, the Ninth Circuit heard oral arguments on the enforcement of California’s climate disclosure status.

• SB 253 Climate Corporate Data Accountability Act
  Requires annual reporting of Scope 1 and 2 emissions starting August 2026, and Scope 3 emissions starting in 2027.

• SB 261 Climate-Related Financial Risk Act
  Requires covered companies to prepare a biennial climate‑related financial risk report starting December 31, 2025.
  (Enforcement of SB 261 is currently stayed by the Ninth Circuit pending this appeal.)

The Court debated whether the statutes (1) compel speech in violation of the First Amendment and (2) regulate commercial speech involving purely factual, uncontroversial disclosures.

SB 253 – Greenhouse gas reporting

SB 253 The Court was interested in whether greenhouse gas reporting, especially Scope 1 and Scope 2 emissions, resembles operational data (allowable) versus ideological speech (violated free speech).

The argument against SB 253 is that emissions reporting becomes controversial when it requires companies to report value-chain emissions (Scope 3) and whether these disclosures pressure companies to change their counterparties’ behavior.

The argument in favor of emissions reporting, including Scope 3, is that investors assess emissions exposure because it influences pricing, insurance, and regulatory risk. It is also based on standardized accounting methods used in emissions reporting.

SB 261- Climate risk reporting

The court's concern is whether SB 261 constitutes compelled speech (a violation of free speech) because it primarily requires a public narrative about “climate-related financial risk” and the measures the company takes to mitigate or adapt to it. Even with limited factual input, the law pushes companies to select assumptions, time horizons, and materiality thresholds in a way that can be seen as endorsing an idea, not just providing factual disclosure.

Next Steps

SB 253 greenhouse gas reporting of scope 1 and scope 2 is more likely than not remain in effect for this reporting year. Companies in scope are strongly encouraged to be ready to meet the August 2026 deadline. The fate of scope 3 reporting will be decided by the court later this year.

SB 261 climate risk reporting remains on hold to later this year. Companies should use this time to consider starting to document their climate risk and internal risk processes. If the stay is lifted, companies should be ready to meet the reporting requirements within the likely grace period of 3 to 6 months.

About the author

Joe Holman founded ESG Administration LLC. With over 25 years of experience in financial services, fund administration, and operational consulting, he brings a rare combination of deep industry expertise and forward-looking ESG insight to the alternative investment landscape.

For more information on this topic or climate reporting, contact ESGA at joe.holman@esgadmin.com.