California’s SB 261 will soon require thousands of companies to disclose their climate-related financial risks. With the first reporting deadline set for January 2026, many firms are asking: Where do we start?
That’s the focus of a new episode of ESG Decoded, where our colleague Jessica Penny, Sustainability Reporting Lead at Mitiga Solutions, joined ClimeCo’s Erica Schiller and Amanda Mast to unpack the regulation and explore how companies can prepare.
Listen to the full episode
What you’ll hear in this episode
- Why scenario analysis is central to SB 261, TCFD, and IFRS S2
- The common gaps companies face when moving from voluntary to mandatory reporting
- How climate intelligence can add value beyond compliance, from investment planning to insurance
- Practical ways Mitiga Solutions makes complex science accessible and decision-useful through our asset-level climate risk assessments and Disclose product
As Jessica shared in the conversation:
“For many companies, reporting is the first touchpoint with climate risk. But once they see the results and combine them with financial data, it becomes a pivotal tool for the business.”
Why this matters
Thousands of firms, both public and private, will be brought into scope under SB 261. Even beyond California, other US states are already considering similar requirements. This episode highlights why companies should see disclosure not just as a new rule to follow, but as an opportunity to build resilience and make smarter decisions.
Full podcast transcript
Welcome to ESG decoded, where we unravel the business complexities at the intersection of environmental, social and governance issues.
I’m Erica Schiller and I'm join ed by my ClimeCo colleagues, Emma Cox and Ana Staplin.
Get ready to explore the intersection of Sustainability innovation and ethical leadership. The dynamic forces shaping our global economy.
From climate action to social reasons we here the ESG Landscape. By interviewing interesting leading figures across the globe that will empower you with actionable insights. Whether you're season practitioner o just embarking on your Sustainability Journey this podcast is your campus for navigating the future of responsible business practices.
Let's decode ESG together.
ERICA SCHILLER: Hello everyone and welcome to ESG decoded. I’m your host, Erica Schiller, and today, I'm being joined by two incredible women. We have Jessica penny who's our Sustainability reporting lead at Mitiga Solutions, thank you Jessica for joining us. And we have Amanda Mast, Sustainability director and our advisory team here. So thank you joining us and today we're be talking about a current issue and requirement and new regulatory framework in California. Though when we say California, we'll get into a little bit more who that applies to because it has a pretty broad reach. But we're going to be talking about California’s SB261, which is a new regulation that goes into effect January first of 2026.
Some of our clients have been reporting voluntarily for a while so these are voluntary reports, climate risk assessments and scenario analysis. And what we've seen is a common gap around actually completing scenario analysis when aligning to TCFD or IFRS.
And Amanda, maybe you could spend a minute to share with us what is scenario analysis and what are those acronyms that I’ve just used.
AMANDA MAST: Actually gonna take you back a little bit further, so when it comes to Senate Bill 261 as you mentioned, some firms have been reporting their climate related risk for a time, others are getting started and are trying to check all the boxes before January 1st and it can feel really daunting and well, a lot of firms have a better sense of, you know, how they’re looking at sustainability overall and what their governance looks like, what their strategy looks like... When it comes to some of these more, tactical or technical ways to look at climate-related risk assessments, which looks different to the ways that we assess different types of risk because it’s changing so significantly. That’s where we’re feeling like a lot of our clients are feeling more daunted on how they’re going to check these boxes and really comply by January.
That’s why we're excited to bring Jessica on and happy to speak with you today a little bit about that.
So coming to scenario analysis, in particular.
So this is a really helpful tool that allows companies to understand their risk over longer periods of time. Just absolutely essential when we’re looking forward into an uncertain climate future where past data are less helpful and predictable than what our future outcomes will be and impacts will be. So it’s a tool to say “Hey, we might not know exactly the future that we’re going to encounter when it comes to climate, but I’ve checked out the resilience of my business under a couple scenarios and I know that I have built-in more resilience into my business model and strategy. So it’s an exciting tool and it’s helpful. The reason it’s being emphasized by a lot of the acronyms and frameworks that you mentioned Erica, is because it’s so helpful given this uncertainty.
So jumping into those 2 acronyms you listed, TCFD, that task force on climate-related financial disclosures or IFRS, those are both climate-related financial risk reporting frameworks.
And so, under these legislations it doesn't “Hey, these are exactly what you need to write”, it gives you some flexibility in choosing what framework you want to use for your climate-related financial risk report and TCFD and IFRS are just the 2 top contenders.
Both frameworks really recommend the use of the scenario analysis, which speaks to why it’s such an effective and important tool, since being recommended really unanimously across top frameworks.
And I should flag also that California Air Resources Board (CARB) is currently developing their regulation to go alongside the Senate bill. It’s in process, it hasn’t been released yet. A lot of my friends are saying “Oh my goodness! What do I do with this ambiguity?”. They have mentioned that they’re going to release a minimum disclosure requirements for year 1 and what they proposed last week in their public meeting, still included the resilience of their business model under different scenarios. While we’re seeing some flexibility, while we’re seeing ambiguity, as we’re waiting for regulation, scenarios are continually coming up as something that’s being recommended across the board.
So I think that's what I’ll say about the context that we're working with in and noting that this is newer for a lot of firms and I think this is why we’re so exciting to have been working with Mitiga Solutions for a long time, as a partner who helps take something that's complex and technical and make it really feasible and impactful for businesses.
I just really appreciate Jessica joining us today. And Erica, I think I answered your 2 questions but if there’s any more detail needed, let me know.
ERICA SCHILLER: Yeah, I mean I guess I'll add that this podcast is gonna be released in september, so it'll be a three month countdown to the January 1st deadline for compliance. So that year 1 that you referenced is 2026 and so that’s the first year that companies will be required to report. Though as we said, many maybe voluntarily reporting in some way already.
And then, Jessica, can you share a little bit about, you know, I know that there are requirements for scenario analysis or voluntary reporting.
But are there any other benefits? You know, how do we talk to companies about the benefits of scenario analysis in better decision making?
JESSICA PENNY: Yeah, no, definitely. So I think in terms of the different benefits:
The first is the reporting tick box that everyone obviously looks at.
But I think it's important not just to see compliance as a nuisance but to also think about how it helps you paint the narrative to your investors and really explain how your business is resilient today when going to the future.
Other of kind of important use cases that a lot of our customers use us for is, for example, in proving the operation efficiency of a lot of their assets. So something that we pride ourselves here at Mitiga is that we give physical climate risk assessments down to the asset-level. So, maybe if we look at decarbonization, a lot of customers are more advanced in their decarbonization planning and thinking about different kind of energy efficiency abatement measures they might have place. If you then layer that with our physical risk assessment and you look at how heat strikes is actually going to change your energy demand overtime, it can really help you be more clever and more savvy about where you invest those energy efficiencies across the business to improve that operation efficiency.
Another really big use case is investment planning. So if you’re looking to acquire a new asset, build a new site, then you can actually use this climate intelligence to plan where that’s going to be propped for performance. Imagine you’re looking at a renewable energy asset and you want to build a wind turbine. If you’re going to locate that in a place where there’s no wind or optimum wind levels, changing over time into the future then that's probably not the best choice. You can use it to help guide those decisions.
And a slightly advanced use case that we’re starting to see is integrating into insurance. So if you can show how you’re responding and adapting to these climate risks, it could help to bring down your insurance premiums. So there’s a lot of value-driven reasons to tackle climate risk and tackle it soon beyond just compliance.
ERICA SCHILLER: And I think it would be helpful if you could share a little bit about a real world example. I mean, I definitely appreciate the kind of case studies that you just showed... Are there some more detailed examples? You know, specific companies and how it might apply to them.
JESSICA PENNY: Yeah, no, of course, I mean, there’s quite an advanced, case study that comes to mind. And I just spoke about that renewable energy in the example.
But we have had the extreme case where a customer has leveraged this data to understand their performance over the year. So obviously, looking at how wind could change over the year to understand how to optimize the performance of their wind turbines. That’s obviously a very advanced case.
But we have stripped back, more simple versions, where people, you know, for the first time they've had to comply, they’re pretty overwhelmed by the thought of it and they’re ticking that box. But actually, when they’ve seen the results, and they’ve taken it away and decided to layer it with financial data and start to present it back to the board, it’s actually been a pivotal point for the business.
ERICA SCHILLER: Yeah and I think when you’re talking about making acquisitions, the value of that, the risks to that side, but also even divestitures, you could even be planning what are areas that you don’t want to operate in the future because of the climate risk associated with it.
JESSICA PENNY: Exactly that. It’s investment planning, acquisition, divestment, expansion. It covers all.
ERICA SCHILLER: That's great and I'd love to understand a little bit more you know how do you make it easier for clients to comply with this and to do this analysis.
JESSICA PENNY: Yes, a hundred percent. And I think to answer that question it might be helpful if i give a little bit of context.
ERICA SCHILLER: Great.
JESSICA PENNY: We’re a climate intelligence company, that’s very much specialized in physical climate risk and our background is science-driven. So we’re a science-first company, but I think we recognize that for many of our customers, their first touch point with climate risk is because they need to report on it and that’s for example, why relationships like what we have with ClimeCo and Amanda have come about because we work with these consultancies that really help drive that reporting work to these customers.
But I think where we recognize that there this reporting need, in the type people that are playing around with this climate data, maybe don’t have that science technical expertise, so kind of our big mission for us here at Mitiga Solutions is to make this complex science really really accessible and really decision-useful and as stripped back and simplified as possible without losing the detail that sits behind it, right?
We want to help you with really credible sustainability reporting. So something we've been working on recently is, is this new product called Disclose, which specifically helps customers meet the requirements of, for example, IFRS-aligned reporting, TCFD-aligned reporting, or you can hear that I'm British, over in Europe, some of that CSRD reporting as well.
What we do is all the customer has to do is provide us with geolocation data for their assets. And with a pretty quick turnaround within an hour, two hours, 24 hours, as quick as you need, we provide them with that climate risk output aligned to that reporting standard.
So it's a really pivotal tool and, and really helpful, and especially with this SB 261-need coming up in the new year because it makes what's already, you know, quite daunting having to turn around a scenario analysis assessment within, within three months, quite accessible.
And obviously ClimeCo and kind of hold your hand and, and steer and make sure that the data you're receiving is, is really being best used and you're getting as much value out of it as possible.
But yeah, I think our main intention is to help, you know, make climate risk assessments more affordable, definitely a lot quicker, but also keep that pride in that science legacy and make sure that the data you're getting is, you know, solid, traceable, and incredibly decision useful.
ERICA SCHILLER: That's great. Really helpful. Thank you Jessica. And I guess one more question, and maybe this is for Amanda. I know that you wrote a blog on ClimeCo's website about who this will apply to, but you know, as our listeners are considering, do they need to worry about SB261? Can you share a little bit about who's impacted in this year one requirement?
AMANDA MAST: Absolutely, Erica.
So the companies that are subject to this legislation include both public and private US-based companies that hit the annual revenue threshold of more than 500 million.
So this is a really big deal when it comes to climate disclosures because while public companies have been writing sustainability reports, often for a long time or a longer period of time, many private firms are getting used to talking about sustainability or will be approaching sustainability reporting for the first time and approaching sustainability risk reporting for the first time.
So I think it's really important as we consider these disclosures to think about, you know, what kinds of information, what kind of data will help a company feel comfortable that they've assessed their risk correctly, they've assessed the significance correctly, and that they feel comfortable pulling that together in a report, which they'll have to share publicly.
So I think that's part of those are broad brush strokes on who's subject to the regulation, but it also shows why this might be a more significant adjustment for some companies. Because it applies to the private firms as well. And so that's also why we appreciate not only having access to data and assessments that are more affordable and quick, but if you can get it for the same price and also feel more comfortable with the risks you're identifying publicly on your first try. I think that's something to consider when evaluating what to do in the next few months or potentially before the next biannual report. So just acknowledging, with this broader pool impacting companies who might be approaching risk for the first time. All things to consider and how you build confidence in what you share publicly.
ERICA SCHILLER: Yeah, and it's for companies that do business in California, right? So they may not be headquartered in California, but if they do business in California, then they could be impacted by this if they're meeting those threshold scale sizes.
AMANDA MAST: Yes, Erica, thank you for flagging that Very important detail. And again, the definition for doing business in California is influx.
It might not include someone with remote workers. But definitely if you're doing work there, if you're selling in the state, it's something to check into and and chat with legal teams about.
ERICA SCHILLER: And did I see recently California might be the fourth largest economy? I feel like I've, I've seen a lot of different numbers that I've seen.
Eighth largest, I've seen fifth largest. I think the most recent one I saw was maybe the fourth largest economy in the world. So a lot of businesses operate here.
AMANDA MAST: Absolutely. A lot of businesses operate in California. Thousands of companies will be subject to this legislation. I guess I should also say, while California is a big splash, will be really impactful. We've got a number of other states who introduce bills with similar disclosure requirements. New York, Illinois, Washington State. They haven't advanced as far as California, but it's an area that's on the top of mind for a lot of legislators, and so we'll likely see more companies be subject to legislation in the future.
So something to consider, even if you don't have to for this round of reporting, more companies will be subject in the future.
ERICA SCHILLER: Great. Well thank you Amanda. Thank you Jessica so much. We'll be sure to link in the show notes, the blog and, and maybe even the direct legislation in case our listeners wanna dig in a little bit more and really appreciate you kind of breaking down how, how we can simplify the compliance for this and also, you know, create business value.
So appreciate your time.
JESSICA PENNY: Thanks, Erica.
AMANDA MAST: Absolutely. Thanks Erica. Appreciate you.
ERICA SCHILLER: Thanks for tuning in to ESG Decoded. We hope this episode has inspired you to take action in your own ESG journey, stimulating ideas for partnership and innovation. New episodes drop biweekly on Tuesday morning. Subscribe now on your favorite streaming platform to stay in the loop. Join the conversation on social media using at sg decoded or visit climb call.com for more resources.
Until next time.
Keep decoding, keep innovating, and keep making a positive impact.