A U.S. federal appeals court has issued an injunction temporarily halting California’s climate-related financial risk disclosure law (SB 261), marking a partial victory for business groups challenging the state’s sweeping new reporting regime [1][2]. The ruling pauses SB 261 only, not the state’s landmark emissions reporting law, SB 253, which remains on track for phased implementation beginning in 2026.

A Split Decision on the Nation’s Most Ambitious Climate Rules

SB 261 would require companies earning more than $500 million annually and doing business in California to report every two years on how climate change affects their financial risk exposure [1][2]. SB 253, which the court allowed to proceed, applies to companies generating more than $1 billion in revenue, requiring full Scope 1, 2 and 3 emissions disclosure, with more than 4,000 companies potentially subject to the rules [1].

The U.S. Chamber of Commerce, leading the lawsuit, argued the laws compel subjective speech and violate First Amendment protections. While the Ninth Circuit agreed to pause SB 261 pending appeal scheduled for January 2026, it rejected the request to halt SB 253, meaning emissions disclosure requirements beginning in 2026–2027 remain unaffected [1][2].

Implications for U.S. Companies Amid Regulatory Uncertainty

California’s climate disclosure package remains the most consequential in the United States, especially as federal regulations, including the SEC’s climate rule, continue to stall under legal pressure [2]. The split ruling creates a complex compliance environment: companies must continue preparing for extensive emissions reporting while uncertainty lingers over financial risk reporting.

Following the decision, the Chamber of Commerce signalled it will continue pursuing full injunctions against both laws, arguing that “one state should not have the ability to impose this kind of burden on the entire country” [1][2].

Meanwhile, California’s Air Resources Board stated it is reviewing the ruling as it continues drafting implementation rules.

References

[1] ESG Today – U.S. Court Pauses Implementation of California Climate Reporting Law
https://www.esgtoday.com/u-s-court-pauses-implementation-of-california-climate-reporting-law/

[2] AP News – Appeals court pauses California law requiring companies to report climate-related financial risk
https://apnews.com/article/california-climate-disclosure-law-paused-court-appeal-42708d5fc7ed15001f4ac5a870eb105d