Gravel2Gavel Construction & Real Estate Law Blog
On November 18, 2025, the U.S. Court of Appeals for the Ninth Circuit issued an injunction temporarily halting the implementation of California’s SB 261, the Climate-Related Financial Risk Act, just weeks before the law’s first mandated disclosures on January 1, 2026. The court declined to stay California’s companion climate emissions disclosure bill, the Climate Corporate Data Accountability Act (SB 253), due to that bill’s less immediately pressing compliance deadline of August 2026.
Background on California Climate Disclosure Laws
As we have discussed in previous posts, California enacted two comprehensive climate disclosure laws in 2023. The Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261) impose greenhouse gas emissions and climate-related financial risk reporting requirements that apply to thousands of public and private companies formed under U.S. law and “doing business in California.” The California Air Resources Board (CARB) has released a preliminary list of companies it believes may be subject to the state’s new climate disclosure regime.
SB 261 requires U.S. entities with more than $500 million in global revenue to publish biennial reports by January 1, 2026, and each two years thereafter, describing their climate-related financial risks. SB 253 requires U.S. entities with more than $1 billion in global revenue to annually report their Scope 1, 2 and 3 greenhouse gas emissions, starting with CARB proposing to have Scope 1 and 2 emissions reporting due in August 2026.
This court challenge to the bills was filed in January 2024 by several major trade groups and business organizations, led by the U.S. and California Chambers of Commerce. The plaintiffs raised various constitutional claims against the bills, including alleged preemption under the Supremacy Clause, extraterritorial regulation and unreasonable burdens on interstate commerce in violation of the Commerce Clause, and violation of the right against compelled speech under the First Amendment. The district court below previously dismissed all but the First Amendment claim and denied plaintiffs’ initial request for a temporary injunction against enforcement of the laws while the case was pending, setting a hearing for January 9, 2026, on the merits of plaintiffs’ preliminary injunction petition.
However, on November 18 and following plaintiffs’ emergency petition to the U.S. Supreme Court last week to stay SB 253 and SB 261, the Ninth Circuit quickly moved to issue a temporary stay of SB 261 to stave off further potential Supreme Court action. In a two-sentence order, the court ruled that a stay of enforcement would be granted for SB 261 but not for SB 253, presumably reflecting the court’s previous view that stakeholders will have adequate time to adjust to the court’s decision before CARB’s proposed SB 253 August 2026 compliance deadline.
Implications
While enforcement of SB 261 is currently stayed, the Ninth Circuit decision does not repeal the bill, and the court’s previous decisions declining to issue longer-term injunctions against either bill may not bode well for plaintiffs. However, in the case of SB 261, the court is presented with a perfect storm of CARB’s delay in issuing implementing regulations months beyond even its Legislature-extended deadline of July 2025, the continued lack of any enforceable regulatory implementation framework for either bill at this time, a looming January 1 deadline for compliance just weeks from today, and no promised court guidance until well after that compliance deadline. If this combination of factors has resulted in a compliance crisis for regulated parties, plaintiffs surely will argue that it is entirely a crisis of the state’s own making, and that regulated parties should not be forced to bear the burden of potential enforcement by having to file potentially deficient climate risk reports in the absence of guiding regulations.
In the meantime, many covered businesses are maintaining their preparations to meet a January 1 compliance deadline, and continue to assess their obligations with respect to whether reporting will actually be required as of January 1, and whether they may choose to file even if the question is not yet settled. With regard to SB 253, most covered entities are moving ahead in light of CARB’s anticipated August 10, 2026, target compliance date. But because of the continued uncertainty surrounding potential court action on both bills, potentially covered companies are advised to consult with legal, environmental and accounting advisors to evaluate and prepare for any changes in potential reporting requirements. Pillsbury will continue to actively monitor the injunction and the decision before the merits panel and will provide updates as new developments occur.