California Air Resources Board Releases Checklist for Climate Related Financial Risk Reporting

Do you manage a company with over $500 million in annual revenue? Is your company doing business in California ($700,000 in annual sales in California)?

The California Air Resources Board (CARB) has rolled out new guidance on the state’s mandatory climate reporting requirements, which represent the most stringent climate reporting regime in the United States. Companies, unless exempt, will have to publicly post their first report on or before January 1, 2026, and should actively be preparing such materials for public disclosure.¹

On September 2, 2025, the California Air Resources Board released a draft checklist to guide companies through the minimum disclosure requirements expected under the new regime. The guidance clarifies which reporting frameworks are expected to be permitted for company use and other updates to guidance based on stakeholder feedback. As summarized in this previous Sidley Update, CARB continues to accept feedback from stakeholders on the reporting requirements until September 11, 2025, and thus CARB’s guidance may be subject to further revision.

CARB Clarifies Acceptable Reporting Frameworks

Under HSC § 38533, companies must prepare reports that disclose “climate-related financial risk” and “measures adopted to reduce and adapt to climate-related financial risk.” According to the guidance from CARB, a reporting entity may prepare such disclosures in conformance with the following frameworks:

• The Final Report of Recommendations of the Task Force on Climate-Related Financing Disclosures (TCFD) (June 2017)
• the International Financial Reporting Standards Sustainability Disclosure Standards, as issued by the International Sustainability Standards Board (IFRS S2)
• a report developed in accordance with any regulated exchange, national government, or other governmental entity, including a law or regulation issued by the United States government

CARB Releases Anticipated Minimum Reporting Requirements

Similar to the TCFD, the guidance from CARB sets out minimum reporting requirements for narrative and quantitative disclosures across four areas: governance, strategy, risk management, and metrics and target. Climate-related financial risk reports should include the following minimum requirements.

• Governance: A description of any governance structure in place to identify, assess, and manage climate-related financial risks and any discussion of Board and management oversight of climate-related risks and opportunities.
• Strategy: A description of the actual and potential impacts of climate-related risks and opportunities on their operations, strategy, and financial planning. CARB has clarified that if quantitative analyses are not relevant or feasible, the disclosure may take the form of a qualitative discussion.
• Risk Management: A description of how the reporting entity identifies, assesses, and manages climate-related risks. Companies should describe the process for identifying, assessing, and managing such risks and how such process fits into the overall management of the company.
• Metrics and Targets: As the minimum expected disclosure, companies should disclose 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. CARB clarified that due to feasibility concerns, Scopes 1, 2, and 3 greenhouse gas emissions reporting is not expected to be required for the initial reporting due on January 1, 2026.

CARB has also requested that each reporting entity provide an information statement, specifying the reporting framework the reporting entity is using to comply with SB 261, a statement as to whether all of the recommendations and disclosures have been provided, and, if not, an explanation as to why, along with plans for future disclosures.

In addition, the guidance from CARB includes clarification as to the entities exempted from HSC § 38533, the relevant reporting period, and consolidation of disclosure at the parent company level. CARB reiterated that entities regulated by the Department of Insurance in California, or in the business of insurance in any other state, are exempt from SB 261. CARB also clarified that if a parent company is reporting on behalf of its subsidiaries, the subsidiaries do not need to prepare separate reports.

CARB is accepting feedback from stakeholders on its reporting requirements until September 11, 2025. CARB expects to publish draft rule language on October 14, 2025.

Next Steps for Business Evaluating Compliance Options

CARB’s expected minimum reporting requirements provide an outline and starting point for the reporting obligations under HSC § 38533. In preparation for the initial reporting deadline of January 1, 2026, companies should take the following actions:

• Review the expected minimum disclosures provided by CARB and provide any input as to feasibility, cost, or otherwise (by September 11, 2025).
• Determine whether any supplemental guidance for particular sectors is applicable.
• Compare, assess, and select the appropriate framework to which to conform reporting (e.g., TCFD, IFRS S2, or another framework approved by CARB).
• Collect information as to the company’s governance structure, applicable risk processes, and Board oversight of risks and opportunities.
• Determine whether quantitative analysis is feasible and, if not, collect qualitative information as to the impact of climate-related risks and opportunities on the company’s operations, strategy, and financial planning.
• Collect data used to assess and manage climate-related risk and opportunities.
• Identify an appropriate page and position on the company website for required posting of the report.
• Prepare draft narrative and quantitative disclosures for review.

Upcoming Deadlines

¹ SB 261 authorizes California’s Climate Related Financial Risk Disclosure Program, which imposes biennial climate-related risk reporting requirements and has been codified in California Health and Safety Code Section 38533.