What private market investors need to know about California’s climate disclosure laws

In 2023, California took a historic step with two new climate disclosure laws that will soon affect thousands of companies across the U.S., public and private alike. Since then, both have been amended, and both are being challenged in court. One is moving forward on a delayed schedule. The other is on hold while that court case plays out.

If you have portfolio companies with meaningful sales in California, these rules are likely to touch you. Even if your headquarters are in another state (or another country), California’s definition of “doing business” reaches far. In many cases, crossing the sales threshold is enough to trigger compliance. That means these laws aren’t just for California-based firms—they’re shaping the landscape for investors nationwide.

SB 253: Climate Corporate Data Accountability Act

What it requires: Companies with more than $1 billion in annual revenue that do business in California must disclose their greenhouse gas (GHG) emissions annually:

• Scope 1: Direct emissions from operations (e.g., company-owned facilities or vehicles).
• Scope 2: Indirect emissions from purchased electricity, heating, or cooling.
• Scope 3: All other indirect emissions across the value chain, like supply chain, commuting, and product use.

Where it stands: SB 253 is active and has not been blocked by the courts. The California Air Resources Board (CARB), the agency implementing both laws, has used its enforcement discretion to push back the original January 1, 2026 statutory deadline twice. As of CARB's June 2026 announcement, first disclosures of Scope 1 and Scope 2 emissions for FY2025 are due November 10, 2026. CARB has said it will publish final submission guidance and a reporting portal by September 1, 2026.

Timeline:

• November 10, 2026: First disclosures of Scope 1 and Scope 2 emissions due.
• 2027: Scope 3 emissions disclosure begins. CARB has proposed folding all scopes into a single annual November 10 deadline starting in 2027, with Scope 3 phased in initially across five of the fifteen GHG Protocol categories (purchased goods and services, fuel and energy-related activities, waste, business travel, and employee commuting) rather than all fifteen at once.
• Assurance: Not required for the initial 2026 filing. Limited third-party assurance on Scope 1 and 2 phases in starting with 2027 reporting, moving to reasonable assurance by 2030. CARB will decide separately whether Scope 3 assurance will be required.
• Fees: Annual fee determinations are due December 10, 2026, with payment due within 60 days.

SB 261: Climate-Related Financial Risk Act

What it requires: Companies with more than $500 million in annual global revenue that do business in California must disclose their climate-related financial risks every two years, aligned with the Task Force on Climate-related Financial Disclosures (TCFD) framework or an equivalent, such as IFRS S2. The report should cover:

• How climate risks are managed at the board and executive level.
• How risks and opportunities factor into strategy.
• What systems are in place for risk management.
• What metrics and targets are being used to track progress.

Where it stands: SB 261 is currently on hold. On November 18, 2025, the Ninth Circuit Court of Appeals granted a preliminary injunction blocking CARB from enforcing the law's original January 1, 2026 deadline while a constitutional challenge plays out. The court heard oral argument on January 9, 2026 and, based on the most recent coverage available, has not yet ruled. CARB has said it will set a new compliance deadline once the appeal is resolved. SB 253 was not part of this injunction and remains on its own separate timeline above.

Timeline:

• Paused: The original January 1, 2026 deadline is not currently enforceable. A new date will follow the Ninth Circuit's ruling.
• Every two years after the eventual first report: Updated disclosures.
• Assurance: No independent verification required.

What this means for your portfolio

For private market investors, these requirements will quickly become part of the conversation with portfolio companies. Non-compliance carries real consequences—fines of up to $500,000 per year under SB 253 and $50,000 per year under SB 261. But the bigger issue is reputational and strategic: portfolio companies that aren’t prepared risk falling behind peers who can meet these expectations with confidence, regardless of how the litigation ultimately shakes out.

Getting your portfolio ready

The disclosures may sound daunting, but the work companies do now will save time, cost, and reputational risk down the line. Some practical steps investors can encourage portfolio companies to take include:

• Start with Scope 1 and 2 emissions. These are required first, have a firm November 10, 2026 deadline, and provide a clear starting point.
• Build capacity for Scope 3 now. It's where many companies struggle, and the good-faith carve-out through 2030 makes this a good window to build the muscle without the same downside risk.
• Prepare for SB 261 despite the pause. The injunction affects enforcement, not the underlying requirement, and a ruling could arrive with little notice.
• Align with TCFD or IFRS S2. Understanding governance, strategy, and risk management today positions companies to meet SB 261 whenever its deadline lands.
• Treat compliance as value creation. Good data isn't just about avoiding penalties. It helps identify risks and opportunities that matter to long-term resilience and, increasingly, to how LPs evaluate portfolio risk.

Making the complex simple

We’ve been working alongside investors and portfolio companies to make these requirements manageable. From emissions data collection to TCFD-aligned reporting, the goal is to simplify what can otherwise feel overwhelming.

That might mean helping a portfolio company map its Scope 1 and 2 emissions today, building the processes for Scope 3 tomorrow, or walking management teams through governance questions under TCFD. The result isn’t just compliance. It’s stronger, more resilient businesses that are ready for the expectations of regulators, LPs, and the market, however the current litigation resolves.

Looking ahead

California’s climate laws are the first of their kind in the U.S., but they won’t be the last. For investors, this is a chance to stay ahead of the curve. By preparing now, you not only help portfolio companies avoid penalties—you also strengthen their ability to thrive in a changing market.


Editor's Note: First published 08/28/2025; last updated 08/24/2026