Disclosure focus
This disclosure asks an organisation to explain how climate-related risks could affect its finances, strategy and operations, and how it is managing those risks. In practice, the report should focus on the main risk types the organisation faces, the time horizons it uses to think about them, and the actions it is taking to assess, reduce or respond to those risks.
The practical emphasis is usually on the organisation as a whole, not just a few high-profile sites. That means looking across relevant operations, assets, supply chains and business activities where climate risk could matter, rather than limiting the discussion to flagship locations or isolated examples.
This LRA educational guidance supports disclosure preparation. For the exact requirements, always refer to the official CARB source.
Before you start
A quick mental checklist before you prepare this disclosure — tick each as you settle it.
Preparation
Key datapoints to prepare
＋ Show SB261-CLIMATE-RISK sub-elements (LRA working checklist)
Identify climate hazards that could directly damage assets, sites, or other physical holdings and create financial loss.
Identify climate-related shifts in policy, technology, markets, or customer behaviour that could affect the business financially.
Check whether climate impacts could reduce the value or performance of capital, funding, or other financial investments.
Assess whether changing climate conditions could weaken customer demand for the organisation’s goods or services.
Assess whether climate-related pressures could disrupt day-to-day business activities or the continuity of operations.
Consider whether climate impacts could put workers’ health or physical safety at risk.
Assess whether climate-related effects could spill over into wider financial markets or the broader economy.
Check whether climate-related disruption could affect suppliers, logistics, or other parts of the supply network.
Review these risks across the short, medium, and long term.
How to prepare it
1Set the reporting boundary first: decide which parts of the business, assets, investments, operations, and supply network are in scope for this climate-risk review, and keep that scope consistent across the disclosure.
2Sort the risks into the required themes using plain business language: impacts on capital and investments, customer demand, staff health and safety, markets and wider economic conditions, day-to-day operations, supply chains, and both physical and transition-related climate risks.
3Gather support for each theme before drafting: use internal records, risk registers, incident logs, scenario work, management papers, and any other source that shows why the risk matters and how it was assessed.
4Prepare the actual disclosure content for each required area, making sure you cover the short-, medium-, and long-range view and explain the risk in a way that is specific enough for a reader to understand the exposure.
5Record any exclusions, assumptions, scope changes, or updates to your approach, so the reader can see what was left out, what changed, and why the final wording matches the evidence you used.
6Check the draft against the official source before sign-off: confirm every required risk area is addressed, the time horizons are included, and the final text still matches the underlying evidence and scope decisions.
Request the data
Request the climate risk evidence from Risk / ERM
Translate the disclosure into an internal business question — then adapt it to your organisation's own language.
What climate-related risks could affect the business, and how are they described across the organisation’s main risk categories and time horizons?
Use your organisation’s own risk language first, then map it to the disclosure categories. For example, ask for the risks your teams already track in risk registers, scenario work, business continuity, or strategic planning, rather than using framework labels in the first ask. Check the official source before sign-off.
Weak request
Please provide the climate-related financial risk disclosure evidence for the reporting period, including physical and transition risks and all material categories.
Why it fails: It uses framework language first, which can force the owner to translate before they can answer. It also does not point to the organisation’s own risk records, so the response may be incomplete or hard to trace back to source documents.
Better request
Please send the latest risk register extract, scenario analysis, or board paper for [reporting period] covering the climate risks your team already tracks for [entity/boundary]. Use your internal risk names first, and include anything that affects investments, customers, people, operations, suppliers, markets, and the time windows you use for planning. Please add the source file, owner, last update date, and a short note on how each risk was assessed.
Industry examples
Draft your disclosure
Notes that turn data into a disclosure
LRA training templates — adapt them to your organisation, and check the official source before sign-off.
Method note
The disclosure should explain the basis used to identify and group climate-related financial risks, including how the organisation distinguished physical from transition exposures and how it assigned them to short, medium and long time periods.
Context note
The figures should help readers understand where climate-related financial risk is concentrated, which parts of the business or value chain are most exposed, and whether the main concerns are immediate or longer dated.
Fluctuation statement
If the profile changes from one period to the next, the reporter can note whether that reflects a revised assessment, a change in business activity, updated climate assumptions, or movement in the timing or severity of the risks.
Content index entry
SB261-CLIMATE-RISK Climate-related financial risk disclosure — [location / page] / [notes]
Download Centre
Preparation tools & forms
Professional preparation tools for SB261-CLIMATE-RISK — free with an LRA Community membership. Register once (it's free) and every download unlocks, together with the Disclosure Library, templates and the LRA AI-assistant.
Free · Community members
Assurance readiness
For each claim, check the evidence
Evidence pack to prepare
Common reporting gaps
The information is presented without a date or as-at point.The scope or boundary of the statement is left undefined.Key terms are used inconsistently across the report.Material changes since the previous period are not disclosed.Assertions are made without supporting detail or a source record.Boilerplate is used that does not actually answer what is asked.
Common gaps
Mistakes to avoid when collecting the data
Wrong owner
Chasing the board pack team for operational climate risk inputs leaves the data owner out of the loop, so the evidence comes from the wrong desk.
Framework language instead of business terms
Asking teams for transition and physical risk in framework wording makes them translate twice, which often produces inconsistent source data.
No clear boundary
Collecting figures without stating which entities, sites, or activities are in scope leads to mixed populations that cannot be compared cleanly.
Wrong period basis
Pulling data from a different reporting window than the one used for the disclosure creates mismatched numbers and stale evidence.
Mixed counting basis
Combining headcount, spend, and incident counts in one file without labelling the basis makes the dataset impossible to reconcile.
Source labels lost
Copying values into a summary sheet without keeping the original file names, system tags, or document references breaks the audit trail.
Separate groups merged
Putting supply chain, operations, and customer-related risk inputs into one bucket hides which business area each item came from.
Missing evidence metadata
Saving the data point without the date, owner, version, and source note leaves no way to show where it came from.
No sign-off trail
Letting the spreadsheet move on without named review and approval means nobody can show who checked the figures before use.
Where judgement is often needed
Set the reporting perimeter after acquisitions or disposals
Use the group boundary that matches the period you are reporting, and if a business has been bought or sold during the year, explain whether its risks are included for the full period, part of the period, or excluded, with the same approach applied across the risk areas you cover.
Choose one way to handle different country definitions
Where local teams use different labels or thresholds for the same climate risk, map them to a single internal description for the disclosure and explain any country-by-country differences so readers can see how the organisation has aligned them.
Decide how to treat activities that sit just inside or outside scope
For sites, entities, products or suppliers near the boundary, state the rule you used to include or exclude them and explain any cut-off or practical threshold so the treatment is consistent and understandable.
Fix the time basis before drafting the narrative
Pick one reporting date or period-end basis for the year, then explain if any risk information comes from a different cut-off because of data availability, so the timing of the disclosure is clear.
Separate measured figures from informed estimates
When direct measurement is not available, say which points are based on records and which rely on estimates or management judgement, and explain the method used so users can judge the reliability of each item.
Explain how you rounded numbers and totals
If you round figures or percentages, use one rounding approach throughout and note it where needed so the individual figures still reconcile sensibly to the overall picture.
Aggregate sensitive workforce or customer information carefully
If privacy rules prevent naming small groups or locations, combine the data to a level that protects individuals and explain the aggregation level so the disclosure still shows the nature of the risk without exposing personal information.
Align risk language across the different risk types
If the same underlying issue affects capital, demand, staff, markets, operations or supply chains, decide whether to describe it once or in several places, and explain the linkage so the reader can follow the organisation’s view of the risk.
Examples
Illustrative examples
Synthetic, written by LRA — not from a company report, not text from any standard.
Illustrative (synthetic) example — Power and utilities
We describe how climate-related risks could affect our business over the near, middle and longer term, separating weather-driven losses from transition pressures. - Physical hazards could disrupt generation sites, damage grid assets and raise repair spend; in this example, £18m of the £30m estimated exposure is near term, £9m is medium term and £3m is long term, with the same profile also affecting employee safety and the continuity of our operations and supply chain. - On the transition side, policy, technology and market shifts could reduce customer uptake, weaken asset values and tighten financing conditions; here, £12m of the £20m estimated exposure is near term, £6m is medium term and £2m is long term, with knock-on effects for capital deployment, consumer demand, financial markets and the wider economy.
This example shows a utility-style reporter linking weather damage and transition pressure to operations, workers, suppliers, customers, investment value and broader market conditions across three time horizons.
Illustrative (synthetic) example — Food manufacturing
We explain how climate-related risks may affect our group across short, medium and longer horizons, using separate estimates for weather-related and transition-related pressures. - Physical events such as heat, flood and water stress could interrupt production, affect staff wellbeing, and strain inbound ingredients and packaging; in this example, £9m of the £15m estimated exposure is short term, £4m is medium term and £2m is long term. - Transition pressures, including changing regulation, customer preferences and financing conditions, could reduce demand, pressure margins and lower the value of planned investments; here, £6m of the £10m estimated exposure is short term, £3m is medium term and £1m is long term, with possible spillovers into our operations and the broader economy.
This example shows a manufacturer describing physical and transition risks in plain language, with separate time buckets and clear links to demand, investment value, worker safety, supply continuity and market-wide effects.
How companies report SB261-CLIMATE-RISK in practice
Real reports where this topic is disclosed. These are report practice, not exact disclosure templates to copy.
Owens Corning
Building Products · United States · 2024
Owens Corning’s 2024 Sustainability Report provides evidence on employee health and safety risks related to climate change, noting that exposure potentials are assessed against established limits to quantify risk (p.62). The report includes related context on climate-related risks impacting financial planning and revenues, as well as a mention of developing a climate transition plan, though no detailed disclosures or headline values are provided for transition risks (pp.356–357). However, the report does not contain clear disclosures on financial market risk, operations risk, physical risks, supply chain risk, or time horizons, with several key risk areas either missing or only partially addressed.
CSX Corporation
Ground Transportation — Railroads · United States · 2024
CSX Corporation’s 2024 Sustainability Report references climate-related risks within its enterprise-level risk management program and mentions long-term climate-related risks with Risk Leaders (p.48). The report also indicates alignment with leading ESG disclosure frameworks such as GRI 2021 Universal and references integration of climate change measures consistent with SDG 13.2 (p.4). However, the report does not provide clear disclosures on specific SB261 climate risk categories including consumer demand risk, employee health and safety risk, financial market risk, operations risk, physical risks, supply chain risk, time horizons, or transition risks.
Sands China Ltd.
Hotels, Restaurants, Leisure, Tourism Services · Macao · 2025
Sands China Ltd.’s 2025 ESG Report includes a general environmental risk assessment process aligned with best practices and notes that climate-related risks are evaluated, with risk assessment conducted up to the year 2100 (pp. 22, 32). The report mentions climate-related opportunities related to operating costs and sustainable service options, and governance responsibility for ESG issues is delegated to the board of directors (pp. 29, 32). However, the report lacks clear disclosures on specific climate-related financial risks such as capital investment risk, financial market risk, operational risk, physical risks, supply chain risk, and time horizons, and the discussion of consumer demand risk is unclear (p. 33).
✓ LRA AI Assistant · Human-in-the-loop
Ask Study Studio AI assistant about this disclosure
Get practical answers for your reporting context. Your first two answers are free — join LRA Community for free to continue without a limit.
TryHow do I prepare SB261-CLIMATE-RISK?What data do I need to collect?Where can I see a real-report example?What mistakes should I avoid?
2 free answers
Check your understanding
Scenarios to work through
A preparer is drafting the climate-risk section for a group with manufacturing sites, a lending book, and a large retail customer base. The team has notes on flood exposure at two plants, possible changes in customer buying patterns, and a review of how weather events could affect deliveries.
QHow should the preparer decide which risk themes to cover so the disclosure is complete enough for review?
Reveal model answer →Hide answer ↑The write-up should cover the main climate-linked financial risk themes that are relevant to the business, not just one type of exposure. In this case, that means explaining any effects on assets and investments, customer demand, staff health and safety, market and wider economic conditions, day-to-day operations, supply routes, and the physical climate hazards themselves, plus any transition-related exposures that matter to the group.
Why this matters · Use the business’s own risk profile to cover all relevant climate-linked financial exposure areas, not only the most obvious one.
A finance lead has prepared a short paragraph saying the company faces weather-related disruption, but it does not say when those effects are expected to show up. The risk team has separate notes for near-term, mid-range, and longer-range planning.
QWhat should the preparer do about timing when describing the risk?
Reveal model answer →Hide answer ↑The disclosure should show how the risk looks across different planning periods, rather than leaving the timing vague. The preparer should explain which effects are expected in the near term, which may emerge later, and which could matter over a longer period, using the organisation’s own planning horizons.
Why this matters · Describe climate risk over more than one time period so readers can see when the effects may arise.
A company has identified a possible shift away from a carbon-intensive product line, but the draft only mentions a general strategic concern. It does not explain whether the issue could affect revenue, financing, or asset values.
QHow should the preparer frame this issue in the climate-risk disclosure?
Reveal model answer →Hide answer ↑The preparer should treat it as a transition-related financial exposure if the shift in the economy or market could affect the business materially. The explanation should connect the change in the operating environment to the company’s finances, such as sales, funding, investments, or other business value drivers, rather than leaving it as a broad strategy comment.
Why this matters · If the change in the low-carbon transition could affect the business materially, explain the financial link clearly.
A preparer has a draft that lists storm damage at one site and heat stress for warehouse staff, but the supply-chain team says a key supplier in another region could also be disrupted by the same weather pattern. The draft does not yet mention that supplier dependency.
QWhat should the preparer do before finalising the risk narrative?
Reveal model answer →Hide answer ↑The preparer should include the supply-chain angle if it is part of the material climate-related financial exposure. The final wording should show how the hazard could affect the company directly and indirectly, including impacts on suppliers, operations, and employee safety where those effects are relevant.
Why this matters · Do not stop at direct site impacts; include upstream and operational knock-on effects where they matter.
Framework references
Related framework references
How this disclosure maps across the major reporting frameworks.
California
SB261-CLIMATE-RISK
within California SB 261: Climate-Related Financial Risk Act
Open official source →Related & explore
Covered entity applicability → Guide ✓Implementation fee and administration →TCFD or equivalent framework alignment → Guide ✓Reporting gaps and completion plan →Biennial reporting timeline and enforcement status → Guide ✓Measures to reduce and adapt to climate-related financial risk → Guide ✓Show all 6 related disclosures →
FAQ
Questions this page answers
How do I use the SB261-CLIMATE-RISK page to prepare a first draft of the climate-related financial risk disclosure?+−
Start with the plain-language explainer, then work through the step-by-step preparation section and the datapoints list. The page also gives draft-output ideas, so you can turn the collected information into a narrative and a content-index line.
What data do I need to gather for SB261-CLIMATE-RISK before I start writing the disclosure?+−
The page points you to nine datapoints: capital and investment risk, customer demand risk, workforce health risk, market stability risk, operating disruption risk, physical climate risk, supplier disruption risk, risk timing bands, and transition climate risk. Use those as the starting checklist for data collection.
How should I scope the SB261-CLIMATE-RISK disclosure so I do not miss a risk area?+−
Use the page’s datapoints list as your scope check and make sure each risk area is considered before drafting. The common reporting gaps section is there to help you spot omissions early.
Who should own the SB261-CLIMATE-RISK data collection and sign-off process?+−
The page does not assign roles, but it is designed for sustainability/ESG managers, HR or data owners, and assurance reviewers to use together. In practice, you would use the workbook and evidence pack to coordinate ownership and sign-off across those people.
What evidence pack do I need to build for SB261-CLIMATE-RISK assurance readiness?+−
The page includes an evidence pack with five items to support assurance readiness. Use it alongside the six assurance claims to verify that each claim, risk and evidence point is covered.
What are the six assurance claims I need to check for SB261-CLIMATE-RISK?+−
The page says there are six assurance claims to verify, each linked to a claim, risk and evidence check. Use the assurance section to test whether your draft is supported before it goes to review.
What are the most common mistakes people make when drafting SB261-CLIMATE-RISK?+−
The page has a list of common reporting gaps and mistakes to help you avoid missing key risk areas or weak evidence. It is meant as a practical check before you finalise the draft.
How do I use the SB261-CLIMATE-RISK workbook download to build the disclosure?+−
The Download Centre includes a Prep & Assurance workbook in .xlsx format and a printable Library Card in .pdf format. Use the workbook to organise preparation and assurance checks, then use the Library Card as a quick reference while drafting.
Can I use the SB261-CLIMATE-RISK example disclosures as a template for my own report?+−
Yes, but only as synthetic illustrations. The page’s example disclosures are there to show how the content can be presented, so you should adapt them to your own data and evidence rather than copy them.
How does the SB261-CLIMATE-RISK page relate to ESRS E1, and can I reuse the same data?+−
The page says the closest ESRS correspondence is ESRS E1 (Climate Change). You can reuse data where it is relevant, but the page does not say the requirements are identical, so you still need to check the disclosure against your own reporting needs.
More questions this page can help with
SB261-CLIMATE-RISK disclosure checklist for sustainability managerSB261-CLIMATE-RISK climate-related financial risk data points to collectSB261-CLIMATE-RISK evidence pack for assuranceSB261-CLIMATE-RISK common reporting mistakesSB261-CLIMATE-RISK workbook download how to useSB261-CLIMATE-RISK draft narrative starters and content indexSB261-CLIMATE-RISK synthetic example disclosure tableSB261-CLIMATE-RISK physical climate risk supplier disruption riskSB261-CLIMATE-RISK transition climate risk timing bandsSB261-CLIMATE-RISK assurance claims claim risk evidenceSB261-CLIMATE-RISK from company reports examplesSB261-CLIMATE-RISK ESRS E1 data reuse
How this library is built
312 published reports indexed
63171 pages with page-level citations
247 practitioner guides
Free · LRA Community
Get your SB261-CLIMATE-RISK tools — free
Your preparation tools are free for LRA Community members and students. Register once (it's free) and your download starts right away — plus the Disclosure Library, templates and the LRA AI-assistant.
✓
You're in — your download is starting
Your file is downloading now. Your Community Cabinet — with the Disclosure Library, templates and the LRA AI-assistant — is ready too.
Open your Cabinet →