How does SB 261 differ from SB 253?

SB 253 requires GHG emissions disclosure (Scopes 1, 2, 3). SB 261 requires climate-related financial risk disclosure following TCFD. They are complementary — SB 253 covers what you emit, SB 261 covers the financial risks climate poses to your business. SB 261 has a lower revenue threshold ($500M vs. $1B) and broader scope.

What TCFD disclosures are required?

SB 261 requires disclosure aligned with TCFD's four pillars: Governance (how the board and management oversee climate risks), Strategy (climate-related risks, opportunities, and scenario analysis), Risk Management (processes for identifying and managing climate risks), and Metrics & Targets (metrics used to assess and manage climate risks).

Is scenario analysis required under SB 261?

SB 261 references TCFD recommendations, which include scenario analysis. While the law doesn't prescribe specific scenarios, TCFD recommends analysis under at least a 2°C or lower scenario. Companies should prepare scenario analysis as part of their compliance approach.

California Climate-Related Financial Risk Act (SB 261)

What Is SB 261?

The Climate-Related Financial Risk Act (Senate Bill 261), signed into law in October 2023, requires large companies doing business in California to prepare and publish climate-related financial risk reports aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework.

While SB 253 focuses on emissions data, SB 261 addresses the financial risks that climate change poses to businesses — physical risks from extreme weather and chronic changes, and transition risks from the shift to a low-carbon economy.

Who It Applies To

SB 261 applies to entities that:

Have total annual revenues exceeding $500 million (lower threshold than SB 253)
Do business in California per Franchise Tax Board definitions

This covers a broader set of companies than SB 253, including many mid-size companies that wouldn't meet the $1 billion threshold.

Key Requirements

Companies must publish biennial reports (every two years) disclosing:

Governance: Board and management oversight of climate-related risks and opportunities

Strategy: Climate-related risks and opportunities the company has identified over the short, medium, and long term, including their impact on business, strategy, and financial planning. Scenario analysis is expected per TCFD guidance.

Risk management: Processes for identifying, assessing, and managing climate-related risks, and integration with overall risk management

Metrics and targets: Metrics used to assess climate-related risks and opportunities, GHG emissions data, and targets

Reports must be published on the company's website and made publicly accessible.

Timeline

October 2023: SB 261 signed into law
2024: CARB begins implementing regulations
2026: First biennial reports due (covering FY2025 climate-related financial risks)
Reports due biennially thereafter

Compliance Steps

Assess applicability: Confirm revenue threshold and California business presence
Familiarize with TCFD: Review TCFD recommendations and implementation guidance
Governance setup: Document board and management climate risk oversight structures
Climate risk assessment: Conduct comprehensive assessment of physical and transition risks
Scenario analysis: Develop at least two climate scenarios (low-warming and high-warming)
Financial impact quantification: Estimate financial impacts of identified risks
Draft TCFD-aligned report: Prepare disclosure covering all four TCFD pillars
Publish: Make the report publicly available on your website and submit to CARB

Penalties

Administrative penalties up to $50,000 per reporting year for non-compliance
No private right of action
CARB enforcement through administrative proceedings

How Council Fire Can Help

Council Fire conducts TCFD-aligned climate risk assessments that satisfy SB 261 requirements while providing genuine strategic value. We combine climate science, financial analysis, and scenario modeling to create reports that meet regulatory expectations. Contact us for SB 261 compliance support.