On Aug. 13, 2025, the U.S. District Court for the Central District of California denied a motion for preliminary injunction seeking to halt enforcement of California Senate Bill (SB) 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act) on First Amendment grounds. (Chamber of Commerce of the United States of America et al v. California Air Resources Board.)

With this ruling, both statutes — currently the only enforceable climate disclosure requirements in the U.S. — remain on track for phased compliance beginning in 2026.

The case raises important questions regarding the scope of the First Amendment as it applies to mandated corporate disclosures in the climate and environmental, social, and governance (ESG) context. This summary outlines the substance of each law, the procedural history of the case, the details of the court’s recent decision and the key implications of that ruling.

Overview of SB 253 and SB 261

SB 253 (Climate Corporate Data Accountability Act)

• Applies to entities with annual revenues over $1 billion doing business in California
• Requires reporting of Scope 1 (direct), Scope 2 (purchased energy) and Scope 3 (value chain) greenhouse gas emissions in conformance with the Greenhouse Gas Protocol
• Public disclosures made to the California Air Resources Board (CARB) or a contracted third party, with third-party assurance
• First reports for Scope 1 and 2 due in 2026; Scope 3 due in 2027
• CARB recently announced phased enforcement and “good faith” allowances for initial compliance and issued frequently asked questions providing implementation guidance.

SB 261 (Climate-Related Financial Risk Act)

• Applies to entities with annual revenues over $500 million doing business in California.
• Requires biennial disclosure on the company’s website of:
  • Climate-related financial risk, consistent with the Task Force on Climate-Related Financial Disclosures (TCFD) framework
  • Measures adopted to reduce and adapt to those risks
• First disclosures due Jan. 1, 2026
• The TCFD framework covers governance, strategy, risk management and metrics/targets.

Procedural Background and Initial Motions

Plaintiffs: U.S. Chamber of Commerce, California Chamber, American Farm Bureau Federation and other business associations

Claims: Four causes of action under 42 U.S.C. § 1983:

• First Amendment (compelled speech)
• Federal preemption (Supremacy Clause)
• Unconstitutional extraterritorial regulation (dormant Commerce Clause)
• Attorneys' and expert fees

Relief Sought: Declaratory judgement invalidating both laws and injunction barring enforcement 

State’s Early Motions:

• Moved to dismiss preemption and extraterritoriality claims
• SB 253 claims dismissed under Rule 12(b)(1) (lack of jurisdiction)
• SB 261 claims dismissed under Rule 12(b)(6) (failure to state a claim)
• Plaintiffs declined to amend; First Amendment claims proceeded
• State also successfully moved under Rule 56(d) to defer plaintiffs’ early summary judgment motion until after discovery

August 13, 2025 Ruling – Motion for Preliminary Injunction

Relief Sought: Plaintiffs asked the court to preliminarily enjoin enforcement of SB 253 and SB 261 based on a facial First Amendment challenge.

Key Findings:

• Ripeness: Challenge to SB 253 is ripe despite pending CARB regulations, due to imminent compliance burdens and enforcement schedule.
• First Amendment Applicability: Both laws compel commercial speech, prompting First Amendment scrutiny. SBs are not exempt as part of a “broader regulatory apparatus” like securities filings because they apply broadly to public and private companies, not only securities issuers.
• Level of Scrutiny:
  • SB 253: Compels purely factual and uncontroversial information (emissions data), qualifying for the Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio standard (rational basis review for compelled commercial disclosures)
  • SB 261: Compels subjective, predictive assessments of climate-related financial risk — not purely factual — so it is subject to intermediate scrutiny
• Merits Analysis:
  • SB 253: Likely constitutional under Zauderer; disclosures are factual, non-misleading, and advance a legitimate state interest (providing investors/consumers with emissions data)
  • SB 261: Survives intermediate scrutiny; state interest in climate-risk transparency is substantial and law is reasonably tailored
• Other Injunction Factors: Plaintiffs did not show likelihood of success on the merits or irreparable harm beyond compliance costs. Balance of equities and public interest favored the state.
• Result: Motion for preliminary injunction denied for both SB 253 and SB 261. The case proceeds toward discovery and potential summary judgment motions.

Key Takeaways

• Court distinguished between objective emissions data (SB 253) and subjective climate-risk assessment (SB 261) in determining scrutiny level.
• For now, both statutes remain on track for implementation (first major compliance dates in 2026).
• Plaintiffs retain their First Amendment claims for trial, but early injunctive relief was rejected.

Conclusion

The court’s August 13, 2025, decision leaves SB 253 and SB 261 in effect, with first compliance deadlines approaching in 2026. The ruling underscores a judicial willingness to uphold climate disclosure laws against facial First Amendment challenges when the disclosures are deemed factual, uncontroversial or reasonably tailored to a substantial state interest.

While the plaintiffs may continue to press their First Amendment claims at trial, their failure to secure preliminary injunctive relief suggests they face significant challenges in ultimately invalidating either statute. Companies meeting the revenue thresholds should prepare for compliance, monitor further developments in the case, and consider how the court’s scrutiny distinctions between objective data and subjective assessments may shape future disclosure obligations.