Audit, Compliance and Risk Blog

California provides checklist for required climate-related reporting

Posted by Jon Elliott on Thu, Oct 09, 2025

Climate2-1On September 2, 2025, the California Air Resources Board (ARB) posted a draft checklist with information to help targeted “covered entities” comply with requirements to provide “Climate Related Financial Risk Disclosure.” These Disclosures are required beginning January 1, 2026, in compliance with state legislation (SB 261 (Stern)) enacted in 2023 (which I wrote about HERE), and amended in 2024 (SB 219 (Wiener); I wrote about it HERE). The remainder of this note summarizes SB 261 and ARB’s draft checklist. 

What does SB 261 require? 

SB 261 requires require each “covered entity” to prepare a biennial climate-related financial risk report disclosing the entity’s climate-related financial risk and the measures it adopts to reduce and adapt to climate-related financial risk, beginning January 1, 2026. Reports must be made available to the public.

What are “covered entities”?

For purposes of SB 261, a “covered entity” means a partnership, corporation, limited liability company, or other business entity formed under the laws of [California, another state, or District of Columbia, or by an act of the US Congress] with total annual revenues exceeding $500 million in its preceding fiscal year, and which does business in California.

What climate-related financial risk reports will be required?

Beginning by January 1, 2026, each covered entity must prepare a biennial “climate-related financial risk report” disclosing both of the following: 

  • The entity’s climate-related financial risk, following the recommended framework and disclosures contained from one of the following: 
    • Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures (convened by the Financial Stability Board) (June 2017 or any successor) (I wrote about the Task Force and its recommendations HERE) 
    • International Financial Reporting Standards Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB). (I discussed a Securities and Exchange Commission (SEC) proposal for such disclosures (since withdrawn) HERE) 
  • Report developed in accordance with any regulated securities exchange, or national or other government, or US federal agency regulation. 

Reports are due every two years beginning January 1, 2026, and must be posted on the entity’s Internet website for public access. Climate-related financial risk reports may be consolidated at the parent company level for subsidiaries and affiliated companies.  

What checklist guidance has ARB just published? 

ARB’s draft checklist presents the following items: 

  1. Reporting Framework - Summarizes allowable reporting frameworks TCFD, IFRS, or exchange/governmental format
  2. Governance – requirement to report entity’s “governance structure, if any, for identifying, assessing, and managing climate-related financial risks”, and associated management oversight
  3. Strategy – 
      • Actual and potential impacts of climate-related risks and opportunities, identified over the short, medium, and long term
      • Impact of these risks and opportunities on the entity’s operations, strategy, and financial planning 
      • Resilience of the strategy 
  4. Risk Management – how the entity identifies, assesses, and manages climate-related risks, including processes used and how considerations and processes are integrated into overall risk management
  5. Metrics and Targets – used to assess climate-related risks and opportunities

What happens now? 

As I noted above, initial Reports are due beginning January 1, 2026. Although ARB describes this month’s document as “draft,” it’s not clear whether the checklist will be finalized. In addition, however, ARB has stated that on December 1, 2025, the agency will post a public docket for reporting entities to post the location of their public link to their initial climate-related financial risk report under this program. ARB will keep this public docket open until July 1, 2026. 

Self-assessment checklist? 

Does the organization do business in California? 

  • If so, is its total annual revenue (not just in California) greater than $500 million? 

Do any of the organization’s activities involve GHG emissions? 

  • If so, does the entity prepare GHG emission reports? 
  • If so, do these reports distinguish among scope 1, 2 and 3 GHG emissions, consistent with GHG Protocol guidance? 
  • Does the entity make its reports available to the public? 

Has the entity evaluated whether any of its activities are susceptible to climate-related financial risk? 

  • If so, has the entity evaluated such risks? 
  • If so, has the entity applied TCFD, IFRS or another methodology? 
  • Does the entity make these evaluations available to the public? 

Where can I go for more information? 

  • ARB

- Climate Related Financial Risk Disclosures: Draft Checklist (9/2/25

- “Climate Change” web portal 

About the Author

jon_f_elliottJon Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 30 years. 

Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).

Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).

 

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Tags: sustainability, ARB, compliance, Environmental Regulations, Corporate Sustainability, Climate Disclosure, ESG Reporting, SB261, CARB, Corporate Risk