California issues draft guidance for climate risk disclosure

The agency responsible for implementing climate disclosure regulations in California issued draft guidance to assist the companies that are required to publish their first reports by Jan. 1, 2026.

While the SEC paused legal defense of its climate rule in February, essentially shelving it for the foreseeable future, a state that qualifies on its own as one of the world’s largest economies continues to move forward with climate-related legislation. The California Air Resources Board (CARB) released the guidance Tuesday for complying with the Climate Related Financial Risk Disclosure Program, which features a law (S.B. 261) requiring companies with at least $500 million in revenues to file climate risk reports every other year.

In March, the AICPA and the California Society of CPAs (CalCPA) asked CARB in a joint comment letter to consider clarifications when developing regulations that ensure CPAs can effectively support a practical and efficient climate disclosure framework.

The draft guidance states that “a reporting entity may use one of several frameworks to meet disclosure requirements”:

• The Final Report of Recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) (June 2017) published by the TCFD (or any successor);
• The International Financial Reporting Standards Sustainability Disclosure Standards, as issued by the International Sustainability Standards Board (IFRS S2); or
• A report developed in accordance with any regulated exchange, national government, or other governmental entity, including a law or regulation issued by the U.S. government (see HSC §38533(b)(3)(A) for details).

On CARB’s resource page, the board posted a notice in mid-October saying that it would delay until the first quarter of 2026 the issuance of proposed regulations to govern the reporting requirements within S.B. 261, as well as S.B. 253, a companion law that will require companies with more than $1 billion in revenue to report greenhouse gas (GHG) emissions annually. CARB hasn’t changed the Jan. 1 deadline for the first round of S.B. 261 reports but has previously said that good-faith efforts for the phase-in period would be considered.

CARB said the issuance was delayed to early 2026 because of the large number of public comments and “ongoing input related to identifying the range of covered entities.” CARB has posted on its resource page an initial list of more than 3,000 entities expected to report and is currently accepting feedback on the list.

The AICPA and CalCPA submitted a joint comment letter on CARB’s draft reporting template for Scope 1 and Scope 2 GHG emissions and previously submitted a comment letter on CARB’s implementation process. For more on the broader topic of sustainability, visit the AICPA’s resource page.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.