U.S.: Federal Appeals Court Halts California’s Climate Disclosure Law

On November 18, 2025, the U.S. Court of Appeals for the Ninth Circuit granted a temporary injunction blocking enforcement of California’s Climate-Related Financial Risk Act (“SB 261”), which requires U.S. companies “doing business in California” with more than US$500 million in revenue to publicly disclose their climate-related financial risks in a biennial report.

The injunction was granted in the context of a legal challenge brought by a coalition of business groups—including the U.S. Chamber of Commerce, the California Chamber of Commerce, and the American Farm Bureau Federation—against both SB 261 and the Climate Corporate Data Accountability Act (“SB 253”). The plaintiffs asserted multiple constitutional and statutory claims, including that SB 261’s disclosure obligations violate certain First Amendment protections. The Ninth Circuit granted the injunction only with respect to SB 261. SB 253—which requires entities with over US$1 billion in annual revenue doing business in California to disclose their greenhouse-gas emissions annually—remains in effect.

On December 1, 2025, the California Air Resources Board (“CARB”) issued an enforcement advisory clarifying the injunction’s impact on entities preparing to report under SB 261. CARB stated that, since argument in the appeal is set for January 9, 2026—after the January 1 reporting deadline under SB 261—CARB will not enforce SB 261 against companies that do not meet the deadline. CARB further indicated that it will provide further information, including an alternate reporting deadline if warranted, after the appeal is resolved.

Notwithstanding the enforcement advisory, entities preparing to report under SB 261 should continue to plan for compliance. It is possible that the Ninth Circuit could render a decision on the appeal against the plaintiffs shortly after January 9 and subsequently lift the injunction. If that occurs, companies may need to comply with SB 261 shortly thereafter.

Links:
Ninth Circuit’s Order
Debevoise Client Update
CARB’s Enforcement Advisory

EU: European Commission Publishes Sustainable Finance Disclosure Regulation 2.0

On November 20, 2025, the European Commission (the “Commission”) published its proposed changes to the Sustainable Finance Disclosure Regulation (“SFDR”), aiming to simplify the disclosure regime for financial products with sustainability characteristics.

The most notable changes include:

• three new categories for financial products: “Sustainable,” “Transition” and “ESG basics.” The new categories would replace the existing framework under Articles 8 and 9 of SFDR;

• a requirement that funds offered to EU retail and professional investors must either select a category and have at least 70% of investments supporting the sustainability claims of that category or, otherwise, significantly limit the amount of sustainability information included in their fund marketing materials; and

• a number of other important simplifications, including replacing the existing disclosure and reporting templates.

The Commission’s proposal has been submitted to the European Parliament and Council for deliberation, which may take up to 24 months. If approved, it will go into effect 18 months after its entry into force.

Links:

Proposal

Press Release

EU: European Central Bank Issues First Climate Risk Fine 

On November 10, 2025, the European Central Bank (the “ECB”) imposed periodic penalty payments on a bank for its failure to conduct a materiality assessment of its climate-related and environmental risks (“C&E risks”).

Since publishing the ECB Guide on C&E Risks in 2020 and concluding a climate-related thematic review in 2022 (more on this here), the ECB has required banks to adequately identify, manage and disclose their C&E risks. The ECB issued a decision requiring the bank to conduct a materiality assessment of its C&E risks by a certain date. After failing to meet the materiality assessment requirements within 65 days of that deadline, the ECB imposed periodic penalty payments on the bank amounting to EUR187,650.

The ECB noted that, when deciding on periodic penalty payments and their overall amount, it considers “the materiality of the infringement, the duration of the breach and the daily turnover of the supervised entity.” The ECB’s decision can be challenged before the Court of Justice of the European Union.

Links:

European Central Bank: Press Release