Why California Is Just the Beginning for Climate Disclosure

California’s climate disclosure laws, SB 253 (the Climate Corporate Data Accountability Act) and SB 261 (the Climate-Related Financial Risk Act), mark a meaningful shift in how climate-related information is regulated in the United States. SB 253 introduces formal expectations around greenhouse gas emissions reporting, while SB 261 focuses on how organizations assess and disclose climate-related financial risk. Together, they move climate information from voluntary reporting toward verifiable, governed information where documentation, oversight, and external scrutiny are expected.

SB 253 requires organizations to report Scope 1 and Scope 2 greenhouse gas emissions, those from direct operations and purchased energy. For insurers with operations, policyholders, investments, or vendor relationships connected to California, these requirements are already influencing near-term planning. Scope 3 is phased in later, but many insurers are already mapping data ownership and vendor inputs so future reporting is built on consistent methods and documentation.

Insurers not connected to California should take note as well, particularly those with multi-state operations or national vendor relationships. California’s regulatory frameworks often shape how other jurisdictions and stakeholders set expectations, particularly in industries that operate across state lines. 

At Johnson Lambert, our work supporting independent assurance readiness for SB 253 gives us a look at how insurers are approaching these requirements, and where early decisions shape process durability, documentation quality, and auditability.

Climate Disclosure Is Becoming a Regulatory Norm

Across the U.S., climate disclosure is increasingly being addressed through state-level regulation. While individual laws vary in scope, thresholds, and timing, several common characteristics are emerging: 

• More clearly defined disclosure requirements
• Greater emphasis on financial materiality
• Expectations that organizations can support reported information with credible processes and governance

Recent legal and policy tracking reinforces this direction. Early 2026 commentary notes that climate-related financial risk disclosure is being explored beyond California, in states including New York, New Jersey, and Illinois. The direction remains consistent: more focus on climate-related financial risk, applicability tied to doing business in a state, and higher expectations for reporting supported by documentation and review.

Why Climate Assurance Readiness Is Rising on the Agenda

The shift from voluntary climate reporting to regulated disclosure changes what readiness means. Climate data is fundamentally different from traditional financial information. Emissions figures are calculated, not measured directly. They depend on methodologies, emission factors, and assumptions that must be documented and defensible. A financial audit traces transactions to invoices. A climate assurance engagement evaluates whether calculation methods are sound, data sources are reliable, and controls are consistent across the organization.

For insurers, that creates coordination challenges. Climate data is often managed by different teams with different systems. When assurance preparation begins, gaps surface quickly. Electricity usage can’t be reconciled because half the locations are sub-metered through landlords. Vehicle emissions were estimated using outdated fleet lists. Data from third-party providers lacks the documentation an assurance engagement requires.

These examples reflect what happens when organizations build climate reporting processes under time pressure without governance in place from the start. The question for leadership is whether to address these structural issues now, while there’s time to test and refine, or later, when deadlines compress and the cost of fixing foundational problems is higher.

The Hidden Cost of Waiting

When climate disclosures require restatement, reputational concerns emerge. Investor and board questions follow. In sectors where peers are further along, the gap becomes visible.

Data dependencies outside the finance team present another pressure point. If reporting depends on sources that cannot provide the documentation quality an assurance engagement requires, gaps become difficult to close quickly. Securing better data flows, adding contractual provisions, or finding alternative measurement approaches on short timelines is costly and disruptive.

The compounding effect adds pressure over time. The longer an organization waits to address process gaps, the harder it becomes to reconstruct historical data with the documentation an assurance provider will expect. Fixing foundational issues while meeting an active disclosure deadline creates competing demands that strain resources and increase the likelihood of gaps.

Organizations that move early have time to test processes, identify weak points in data collection, and build documentation practices before review. Beyond compliance timelines, investors and rating agencies are paying closer attention to climate-related reporting quality. Insurers that can produce credible, well-supported climate information may find advantages in capital markets and stakeholder confidence.

What This Evolution Means for Insurance Leadership

For insurance leaders, climate disclosure presents a series of enterprise reporting questions: 

• Where does climate-related information live across the organization? 
• Who owns the underlying inputs and assumptions? 
• How is the reporting supported with documentation that can hold up under review?

The insurers best positioned are treating climate disclosure as part of established reporting and governance, rather than as a separate sustainability workstream. This supports consistency across entities and functions, reduces rework as requirements evolve, and strengthens readiness for jurisdictions that require attestation.

The question facing leadership is whether to build the foundation once or rebuild it multiple times as requirements expand. Organizations that invest in process quality, data governance, and documentation rigor now can respond to future requirements without starting over. Those that defer foundational work will face higher costs, compressed timelines, and greater execution risk.

California as an Early Indicator

California’s SB 253 and SB 261 show how quickly climate disclosure can move into regulated, audit-ready territory. For insurance organizations, the larger signal extends beyond California. As state-level activity develops and expectations become more formal, the critical differentiator will be whether climate-related reporting is built on a foundation that supports evidence, consistency, and governance across the enterprise.

Johnson Lambert provides independent third-party attestation services for SB 253 reporting, backed by deep insurance specialization and audit independence. If you are determining whether your organization is in scope for SB 253, connect with us to discuss how we confirm in-scope entities and evaluate emissions reporting for attestation readiness across complex structures and vendor relationships.