The Federal Appeals Court suspended the implementation of a California law on November 18 that would have required many companies to compile climate-related financial risk reports.
The three-judge panel of the U.S. Ninth Circuit Court of Appeals ruled to prevent California officials from taking steps to enforce SB261, which was originally slated to take effect in January 2026.
The decision, with only one page and no reasoning provided, also allows California to continue implementing another law, SB253, which mandates large corporations to disclose their carbon emissions annually.
The Chief Legal Counsel of the U.S. Chamber of Commerce, Daryl Joseffer, welcomed the ruling. The Chamber, among other groups, had previously filed a lawsuit asserting that the law infringed on the First Amendment rights of businesses.
“The U.S. Chamber welcomes the Ninth Circuit’s decision to stay California’s unconstitutional climate information disclosure law pending appeal,” Joseffer stated. “Blocking this law before it takes effect on January 1 is critical to protecting businesses and their First Amendment rights. We look forward to continuing to appeal the injunctions against both climate disclosure laws, as they would impose massive compliance costs on businesses and their supply chains. One state should not have the authority to impose such burdens across the nation.”
Lindsay Buckley, a spokesperson for the California Air Resources Board (CARB), said the agency is currently reviewing the ruling and refrains from commenting at this time. California argues that such laws do not violate the First Amendment as commercial speech is not afforded the same level of protection under the U.S. Constitution.
SB261 requires CARB to develop rules mandating large corporations to publicly submit a report every two years, containing specific information, including reviewing climate-related financial risks disclosed in publicly available reports and analyzing systemic and industry-specific climate-related financial risks facing California.
Governor Newsom signed SB261 in 2023, which applies to companies with annual revenues exceeding $5 billion and conducting business in California. CARB estimates that over 4,100 companies would need to comply once the law is enforced.
Another law passed the same year, SB253 for carbon emissions disclosure, applies to companies with annual revenues exceeding $10 billion and operating in California. Officials estimate that SB253 covers about 2,600 companies. Businesses will be required to disclose pollution generated from direct burning of fossil fuels, as well as emissions from transporting goods (such as from warehouses to stores) or employee travel.
The U.S. Chamber of Commerce and other business groups express concerns that companies may need to spend significant amounts of money (potentially exceeding $1 million) to comply. Consultancy firm ERM estimates compliance costs to range between $237,000 and $533,000.