CARB Releases SB 261 Draft Checklist: What Companies Need to Know
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On September 2, 2025, the California Air Resources Board (CARB) released a Draft Checklist for Climate-Related Financial Risk Disclosures under Senate Bill (SB) 261. This article reflects KERAMIDA’s interpretation of the newly issued checklist. While the checklist is preliminary and not legally binding, it offers companies valuable clarity on how to address the good faith clause and what we at KERAMIDA believe CARB is likely to expect in SB 261 reports to meet statutory obligations.
Why the SB 261 Checklist Matters
SB 261 applies to U.S. companies with annual revenues over $500 million that do business in California. The definition of doing business in California and the definition of revenue are still under evaluation by CARB. SB 261 requires biennial public reports on climate-related financial risks, which are to include the steps taken to mitigate and adapt to those risks. The newly released draft checklist is important because it helps clarify several uncertainties around these reporting obligations. However, it does not resolve all open questions, and companies should be prepared for further guidance as CARB finalizes the regulations later in the year.
The Checklist’s Five Core Disclosure Elements
The Draft Checklist outlines CARB’s preliminary expectations for SB 261 reporting. The following summary reflects KERAMIDA’s interpretation of the checklist and highlights five key areas CARB identified that companies should address to demonstrate good faith compliance.
1. Reporting Framework
Companies must identify the disclosure framework guiding their report. CARB’s Draft Checklist is built on the TCFD framework.
Minimum requirements:
State the reporting framework selected (e.g., TCFD, IFRS S2, or another).
Identify which recommendations and disclosures related to the chosen framework are included and which are not.
Provide a brief explanation for omissions and indicate any plans for future disclosures.
2. Governance
Reports must explain governance structures for managing climate-related risks and opportunities.
Minimum requirements:
Describe governance processes for identifying, assessing, and managing climate risks.
Explain management’s role in overseeing risks and opportunities.
Describe Board oversight, if applicable.
3. Strategy
Reports should describe how climate-related risks and opportunities might impact corporate strategy. CARB does not require Climate Scenario Analysis (CSA) for the initial reporting year.
Minimum requirements:
Describe actual and potential impacts of climate risks and opportunities on operations, strategy, and financial planning (where material).
Identify climate-related risks and opportunities over the short, medium, and long term, and note which are considered material.
Explain the resilience of the company’s strategy in relation to climate change.
4. Risk Management
Reports must show how climate-related risks are incorporated into the broader corporate risk management framework.
Minimum requirements:
Describe how climate risks are identified, assessed, and managed.
Explain evaluation processes and integration into overall corporate risk management.
5. Metrics and Targets
Although TCFD and IFRS S2 guidance recommend including GHG emissions data where applicable, CARB has clarified that a company is not required to disclose GHG emissions in SB 261 reporting during this initial year.
Minimum requirements:
Disclose metrics and targets used to assess and manage material climate-related risks and opportunities.
Additional Clarifications
In addition to the five core reporting areas, CARB’s Draft Checklist offers important clarifications:
Subsidiaries: Separate reports are not required if the parent company reports on their behalf.
Insurance Entities: Companies regulated by the Department of Insurance, or engaged in the business of insurance, are exempt.
Materiality: Disclosures should focus on climate-related financial risks and mitigation measures that are material to the company’s operations and financial outlook, especially within Strategy and Metrics/Targets. Determinations of materiality should follow the guidance of the selected disclosure framework (e.g., TCFD).
Decision-Usefulness: Above all, disclosures should provide meaningful information that supports stakeholder decision-making.
The Draft Checklist sets out CARB’s preliminary minimum expectations for SB 261 compliance. While not exhaustive, it provides a clear foundation for companies to begin preparing their reports. To demonstrate good faith compliance, companies should now:
Select and align with a disclosure framework,
Confirm governance and oversight structures, and
Begin developing content that addresses the five reporting areas and related clarifications.
By doing so, companies can move toward meeting both the spirit and the letter of SB 261, while positioning themselves for future regulatory updates as CARB finalizes the rules.
KERAMIDA has extensive experience working with clients to prepare reports that comply with SB 261 and SB 253, as well as TCFD, IFRS S2, and other standards. Schedule a time to talk with one of our CA SB 261 compliance experts to get started using our proven SB 261 compliance process.
Authors
Faythe Missick, MA, MSc
Senior Manager, Sustainability
KERAMIDA Inc.
Contact Faythe at fmissick@keramida.com
Kendra Roesner, MPA-MSES
Senior Analyst, Sustainability
KERAMIDA Inc.
Contact Kendra at kroesner@keramida.com
Vicky Keramida, Ph.D.
CEO & Chief Technical Officer
KERAMIDA Inc.
Contact Vicky at keramida@keramida.com
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