US Appeals Court Halts California Climate Risk Disclosure Law Pending Appeal

A US Ninth Circuit appeals court has issued an injunction pausing the implementation of California's SB 261 law, which requires large companies doing business in California to report on climate-related financial risks, just weeks before the law's first mandated reports were due on January 1, 2026. The court did not halt the companion law, SB 253, which requires companies to disclose greenhouse gas emissions and is scheduled to begin implementation in August 2026.

SB 261 applies to US companies doing business in California with revenues greater than $500 million, requiring disclosure of climate-related financial risks and risk adaptation measures. SB 253 covers companies with revenues over $1 billion doing business in California, requiring annual disclosure of Scope 1 and 2 emissions from August 2026 and Scope 3 emissions from 2027. The California Air Resources Board has published a preliminary list of more than 4,000 US companies likely subject to the new laws. Both laws were approved by Governor Newsom in 2023 and signed in October 2024.

The injunction was issued in response to a legal challenge by the US Chamber of Commerce, which argues that the laws violate the First Amendment by compelling companies to engage in what it characterises as subjective speech. The Chamber's appeal is currently scheduled for January 2026. The laws represent the most significant mandatory corporate climate disclosure requirements in the US, given the ongoing uncertainty around the SEC's climate reporting rule under the current administration.

For international companies including Indian firms with significant US revenues or operations, the California climate reporting laws are directly relevant even if the paused SB 261 eventually survives appeal in modified form. SB 253's Scope 3 requirements, which extend to supply chains and procurement, would have significant upstream data collection implications for companies doing business with California-based buyers. The court's decision to allow SB 253 to proceed while pausing SB 261 indicates that emissions reporting faces a different legal assessment than risk disclosure reporting.

Key figure — More than 4,000 US companies on California Air Resources Board's preliminary compliance list