California Climate Disclosure Laws Face First Amendment Test in Federal Appeal

California’s effort to expand climate accountability through mandatory corporate disclosures is now tied up in a constitutional fight that could shape future insurance and risk reporting obligations. In 2023, the California State Assembly passed SB 253 and SB 261, targeting large companies doing business in the state. Together, the laws require emissions reporting and detailed disclosure of climate related financial risks, governance structures, and long term mitigation strategies.

For insurers and claims professionals, these disclosures matter because they influence how climate exposure is documented, priced, and later scrutinized during coverage disputes. Climate risk statements can become discoverable materials in litigation, influence reserve setting, and affect how carriers evaluate insureds operating across multiple states.

A coalition led by the U.S. Chamber of Commerce challenged the laws, arguing they compel speech on a contested political issue and exceed traditional commercial disclosure requirements. The plaintiffs contend SB 261 goes beyond factual reporting and forces companies to adopt California’s views on climate risk as a driver of corporate decision making, a position they argue violates the First Amendment.

The legal battle has already produced meaningful developments. In November 2025, the Ninth Circuit Court of Appeals blocked enforcement of SB 261 while allowing emissions reporting under SB 253 to continue. Judges have questioned whether the disclosures are overly vague and whether state level requirements are redundant given the SEC’s federal climate framework. Until a final ruling is issued, insurers and claims handlers should expect continued uncertainty around climate risk disclosures and their role in underwriting files, claim investigations, and future climate related litigation.