In a significant development for companies operating in California, the U.S. Court of Appeals for the Ninth Circuit has temporarily halted enforcement of Senate Bill 261 (SB 261), the state’s new climate-risk disclosure law. SB 261 was set to require large businesses with annual global revenues over $500 million to publish detailed reports about their climate-related financial risks beginning January 1, 2026. The law is part of California’s broader push to increase transparency around environmental impacts and climate-driven business risks.
A coalition of business groups challenged SB 261, arguing that the law violates the First Amendment by compelling companies to speak publicly about climate change—a topic they claim is politically and socially charged. They contend that forcing companies to prepare and release climate-risk assessments amounts to mandatory speech that California has no authority to demand. In response, the Ninth Circuit issued an injunction temporarily blocking the state from implementing or enforcing the law while the litigation proceeds.
The court’s decision does not strike down SB 261; instead, it pauses the law until a full review of the constitutional issues is completed. For now, affected companies do not need to prepare the required climate-risk disclosures, but they should continue monitoring the case closely. Depending on how the courts ultimately rule, the reporting obligations could be reinstated—or the law could be permanently blocked.
This pause also raises broader questions about the future of climate-related corporate reporting in the United States. As regulators and states push for greater environmental transparency, courts are being asked to weigh how far governments can go in mandating public disclosures before crossing into unconstitutional compelled speech. SB 261 is now a central test case in that debate, and its outcome may shape how climate-risk reporting is regulated across the country.
