Update on the Ninth Circuit Hearing for California’s Climate Disclosure Laws

California’s climate disclosure laws — SB 253 (GHG emissions reporting) and SB 261 (Climate-related financial risk disclosure) are currently the subject of an active legal challenge before the Ninth Circuit. During oral arguments on January 9, 2026, the court examined the constitutional and structural questions raised by the U.S. Chamber of Commerce, signaling key aspects of how the panel may approach the case. The judges focused on the legal framing of the statutes rather than disputing the relevance of climate-related information to investors.

Key Takeaways

• The Ninth Circuit is evaluating California’s climate disclosure laws based on constitutional structure and tailoring rather than the value of climate risk data.
• Scope 3 emissions reporting under SB 253 faces the highest legal risk due to its reliance on broad value‑chain disclosures.
• A decision is expected within 3–6 weeks, potentially providing clarity ahead of the 2026 compliance timeline.
• Companies should continue preparing for compliance, prioritizing data governance and independent assurance to strengthen disclosure credibility.

Key Legal Questions Driving the Ninth Circuit Review

The panel did not challenge the legitimacy of, or investor reliance on, climate-related disclosures. Instead, the judges concentrated on whether the laws operate as commercial disclosure regimes, whether they are properly “tethered” to commercial activity, and whether the requirements are appropriately tailored. This framing underscores that the legal challenge centers on constitutional structure rather than the substance of climate risk.

How Judges Evaluated SB 253 vs. SB 261

The court drew clear distinctions between the two laws. In SB 253, the judges focused on Scope 3 emissions, which appear to pose the greatest constitutional vulnerability given their reliance on value-chain reporting. For SB 261, with its different disclosure structure, is likely to be evaluated separately and may face a different legal trajectory.

California argued that the laws regulate disclosure, not emissions, and do not penalize companies for climate performance. The state emphasized that standardized climate data addresses a market failure by providing investors with comparable, decision-useful information.

The U.S. Chamber of Commerce contends that the laws amount to unconstitutional compelled speech as the disclosures are broad, costly, and insufficiently tied to specific products or transactions. California countered that investment, lending, and insurance decisions constitute the relevant commercial activity.

What Happened During the January 9 Hearing

During the hearing, the judges pressed both sides on the scope of the laws, the breadth of the disclosures, and the constitutional limits of compelled commercial speech. The panel appeared particularly focused on whether Scope 3 emissions reporting fits within First Amendment precedent and whether the state’s rationale is sufficiently narrow. No judge signaled opposition to climate disclosure as a concept; the focus remained on legal architecture and statutory design.

Implications for Companies Preparing for Compliance

The court’s scrutiny is centered on the structure, scope, and tailoring of the laws as opposed to whether climate disclosure is appropriate or valuable. Scope 3 emissions under SB 253 remain the most legally vulnerable component. A decision is expected within 3-6 weeks, meaning operational clarity may arrive well before the broader 2026 compliance timeline.

What Companies Should Do Now to Prepare

Companies should continue to prepare for compliance, treating climate disclosure as a transparency and data-governance exercise rather than a mandate to pursue specific climate strategies. As these climate disclosures are expected to become public, companies should also consider obtaining independent assurance to enhance credibility and readiness. Connect with EisnerAmper using the form below to get support or questions answered.