The California Air Resources Board (CARB) announced the release of a new publication, offering clarifications and guidance for companies preparing to provide their first reports under a new regulation requiring companies to provide disclosures on climate-related risks and opportunities.
The new publication, Climate Related Financial Risk Disclosures: Draft Checklist, focuses on the reporting requirements under SB 261, the “Climate-Related Financial Risk Act,” which applies to U.S. companies that do business in California and with revenues greater than $500 million, requiring them to prepare a report disclosing their climate-related financial risk, as well as measures to reduce and adapt to that risk.
For companies within the scope of the Climate-related Financial Risk Reporting, the document confirms that publication of the first climate-related risk reports are to be published by January 1, 2026, with reporting every other year following the initial report.
The new publication includes a series of clarifications in response to questions received by CARB. Among the key pieces of information is a clarification that subsidiary companies do not need to break out their own information separately if their parent company issues a report on its behalf. The document also explains that the regulation’s disclosure requirements can be met through the use of one of several reporting frameworks, including the 2017 recommendations of the TCFD, of the IFRS Foundation’s IFRS S2 climate reporting standard, in addition to frameworks provided by a regulated exchange or national government. The publication also clarifies that insurance companies are not included in the scope of the regulation.
The document also reveals that Scope 1, 2, and 3 emissions reporting will not be required for companies’ initial reports, following feedback from CARB that gathering the information may not be feasible prior to the 2026 deadline, and that it may be duplicative with another regulation, SB 253, set to begin later in 2026. Additionally, following feedback that conducting scenario analysis as a detailed quantitative exercise may be overly burdensome of duplicative with SB 253, CARB’s guidance allows scenario analysis to be qualitative in nature.
The publication’s checklist is aimed at providing a “starting point for reporting entities,” to assist in complying with the new regulation’s requirements.
The checklist details the minimum requirements for disclosure under the key topics of:
Governance, with requirements including a description of the company’s governance structure for identifying, assessing, and managing climate-related financial risks, including discussions of management oversight and a description of board oversight of climate-related risks and opportunities;
Strategy, requiring descriptions of the climate-related risks and opportunities the organization has identified over the short, medium, and long term, the impact of the risks and opportunities on operations, strategy, and financial planning, and the resilience of the company’s strategy taking into consideration the future impacts of climate change under various climate scenarios;
Risk Management, requiring a description of the process used for identifying, managing and assessing climate-related risks, and how those considerations and processes are integrated into the organization’s overall risk management, and;
Metrics and Targets, requiring the disclosure of the metrics and targets used to assess and manage relevant climate-related risks and opportunities adopted to reduce and adapt to climate-related risk, where such information is material.
Click here to access the CARB checklist.
