The California Air Resources Board (CARB) recently released a Draft Checklist to assist companies in preparing climate-related financial risk reports under Senate Bill 261, codified at California Health and Safety Code (HSC) § 38533. While the Checklist offers limited new guidance, it provides a useful roadmap for entities subject to reporting obligations, particularly entities that may not have prepared previously and/or published disclosures consistent with recommendations issued by the Task Force on Climate-related Financial Disclosures (TCFD).
Climate Related Financial Risk Disclosures: Draft Checklist
The Checklist enumerates five steps companies should take to navigate initial compliance under HSC § 38533, drawing heavily from the TCFD framework. CARB emphasizes that the checklist is a starting point, not a comprehensive template, and that companies should tailor their disclosures based on the facts and circumstances relevant to their organization. Specifically:
1. Pick a Reporting Framework—Identify which reporting framework1 the entity is applying and which recommendations and disclosures it has compiled under such framework, along with a “short summary” explaining why certain recommendations or disclosures are excluded and plans for future disclosures. The Checklist notes that if a report includes data regarding an entity’s greenhouse gas (GHG) emissions (and related mitigation strategies, if any), then CARB may consider those claims only if verified by an independent third-party assurances provider.
2. Governance—Disclose the organization’s governance structure for managing climate-related financial risks and opportunities, including management and board oversight (if applicable).
3. Strategy—Describe the actual and potential impacts of material climate-related risks and opportunities on the entity’s short-, medium-, and long-term operations, strategy and financial planning. Covered entities should discuss the organization’s resiliency under different climate scenarios in a qualitative or quantitative nature.
4. Risk Management—Outline the processes for identifying, assessing, and managing climate-related risks, and how such processes are integrated into broader enterprise risk management systems. The Checklist emphasizes managing climate risks “proactively” and “consistently.”
5. Metrics and Targets—Disclose the metrics and targets used to assess and manage material climate-related risks and opportunities. Scope 1, 2 and 3 emissions disclosures are permitted, but not required.
Frequently Asked Questions (FAQs) Addressed by Draft Checklist
In addition to the Checklist, CARB clarified and supplemented its existing FAQ document, addressing exemptions, calendar versus fiscal year reporting, utilization of third party reports and reporting requirements on a consolidated and/or individual entity-level (i.e., subsidiary) basis. Broadly speaking, these supplemental FAQs reiterate points CARB already has clarified or that are stated explicitly in the statute. We expect CARB to provide additional guidance and clarification in the coming months.
Looking Ahead
CARB expects to publish draft regulations on October 14, and final regulations around December 11-12, 2025. HSC § 38533 reports are due January 1, 2026. On December 1, 2025, CARB will publish a public docket where covered entities must submit a link to their report.
We have written about California’s climate reporting statutes (HSC §§ 38532, 38533) here, CARB’s first and second public workshops here and here, and legal challenges to the statutes here. Akin will continue to monitor developments related to HSC § 38533 and other California climate disclosure laws. Our team is actively advising clients on compliance strategies.
1 The statute allows for reporting aligned with TCFD (June 2017), IFRS S2, or a report developed “pursuant to a law, regulation, or listing requirement issued by any regulated exchange, national government, or other governmental entity, including . . . the United States government.” HSC § 38533(b)(3)(A). Such an exchange or framework would be akin to the Securities and Exchange Commission’s (SEC) proposed climate disclosure rule, which is stayed and remains subject to legal challenge before the Eighth Circuit. Read more about the SEC’s decision to abandon its defense of the proposed rule here and its subsequent request for the court to issue a ruling here.
