SB 261 Disclosure Example: Manufacturing

Climate-Related Financial Risk Report

Halloran Pacific Industries, Inc., Fiscal Year 2025

Prepared pursuant to California Senate Bill 261 (Health & Safety Code § 38533)

Foreword: why this example exists

California Senate Bill 261 (SB 261) requires large companies doing business in California to publish a climate-related financial risk report. The first reports were due by January 1, 2026, and are posted on each company’s own website. For the law’s full scope, deadlines, and current status, see SB 261 and SB 253 requirements, deadlines, and status.

Reading the first wave of manufacturing reports, one pattern stands out. The Governance and Risk Management sections tend to read well. They describe boards, committees, and risk processes in clear qualitative terms. The physical-risk parts of the Strategy and Metrics sections are usually thinner. Reporters often name the hazards (wildfire, flood, heat) but stop short of saying which of their own sites are exposed, by how much, and under which climate scenario. Few attach any dollar figure to physical risk.

That gap is the reason for this example. It walks through all four parts of the framework, but it spends most of its detail where first-wave reports were weakest: identifying specific assets, quantifying their exposure by scenario and time horizon, and showing the financial side of physical risk in concrete terms. For background on how physical climate risk assessment works across hazards, scenarios, and time horizons, see our explainer. The asset-level figures here were produced with the Continuuiti Climate Risk service.

Basis of preparation

Who has to report (and why we do). SB 261 applies to a “covered entity.” Section 38533(a)(4) defines that as a business entity formed under US law with total annual revenues over $500 million that does business in California. The statute reads, in part:

“‘Covered entity’ means a corporation, partnership, limited liability company, or other business entity formed under the laws of the state, the laws of any other state of the United States or the District of Columbia, or under an act of the Congress of the United States with total annual revenues in excess of five hundred million United States dollars ($500,000,000) and that does business in California.”

In plain terms: if you are a US company, you made more than $500 million in your last fiscal year, and you operate in California, you are in scope. Insurers regulated by the California Department of Insurance are the main exception; the same subsection carves them out.

Halloran Pacific Industries, Inc. is a Delaware corporation with fiscal-year-2025 revenue of approximately $1.24 billion and operations in California. We are not an insurer. We meet the definition of a covered entity and report on that basis.

Which framework this report follows. Section 38533(b)(1)(A)(i) requires the report to disclose climate-related financial risk:

“in accordance with the recommended framework and disclosures contained in the Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures (June 2017) … or any successor thereto, or pursuant to an equivalent reporting requirement as described in paragraph (3).”

In plain terms: the law points to the Task Force on Climate-related Financial Disclosures (TCFD) framework. The TCFD organizes climate disclosure into four areas: Governance, Strategy, Risk Management, and Metrics and Targets. For a full explainer of the TCFD framework and its four pillars, including the scenario-analysis recommendation, see our guide. This report follows that four-part structure. Section 38533(b)(3) also lets a reporter satisfy the law by filing under an equivalent standard, including the IFRS S2 standard issued by the International Sustainability Standards Board (ISSB). We considered that route and chose to report directly on the TCFD framework named in the statute.

What else the law asks for. Beyond describing the risk, Section 38533(b)(1)(A)(ii) requires disclosure of “its measures adopted to reduce and adapt to” that risk. We address those measures in the Strategy and Risk Management sections and gather them in a dedicated section near the end.

Where you can find this report, and how often. Section 38533(c)(1) requires a covered entity to post the report on its own website by January 1, 2026, and every two years after that. This report is posted accordingly.

A note on completeness. Section 38533(b)(1)(B) allows a reporter that cannot yet make every recommended disclosure to report to the best of its ability, explain the gaps, and describe the steps it will take to close them. We rely on that provision in a few places and flag them plainly in the section titled “Where this disclosure is still developing.”

Reporting entity profile

Halloran Pacific Industries, Inc. designs and manufactures engineered components, industrial equipment, and packaging systems. The company is incorporated in Delaware, headquartered in California, and operates across several US states. FY2025 revenue was approximately $1.24 billion. The company employs roughly 3,400 people.

This report focuses on the company’s California operations, which carry the exposure most relevant to an SB 261 reader. Five California sites account for approximately $420 million of property, plant, and equipment (replacement-cost basis). All site values below are illustrative.

Governance

Climate-related financial risk is governed through the same structures the company uses for its other enterprise risks, with defined board and management responsibilities.

Governance (a): Board oversight of climate-related risks

The Board of Directors oversees climate-related financial risk through its Audit and Risk Committee. The committee reviews the company’s enterprise risk register, which includes climate-related physical and transition risks, at least twice a year. It receives the site-level physical-risk analysis summarized in this report and reviews whether the company’s adaptation measures are adequate. The full Board considers climate-related risk when it reviews long-term capital allocation and major site investments.

Governance (b): Management’s role

Day-to-day responsibility sits with a cross-functional climate risk working group, led by the company’s head of risk and including operations, finance, facilities, and legal. The working group commissions the annual site-level hazard analysis, maintains the climate entries in the enterprise risk register, and brings material changes to the Audit and Risk Committee. Site and plant managers carry out the adaptation measures at their locations. Capital requests for resilience projects go through the company’s normal capital-approval process.

Strategy

The Strategy section is where SB 261 asks the most of a reporter, and where this example goes deepest. It follows the three TCFD Strategy disclosures: the risks we have identified, the effect of those risks on the business, and how resilient our strategy is across climate scenarios.

Strategy (a): Climate-related risks identified over the short, medium, and long term

We use three time horizons:

• Short term: present to 2030.
• Medium term: 2030 to 2040.
• Long term: 2040 to 2050.

These horizons align with how we plan capital projects and with the time windows over which our physical-risk analysis projects hazards.

Physical risks. We identified physical hazards site by site rather than for the company as a whole. A company-wide statement (for example, “wildfire and flooding could affect operations”) is true but does not tell a reader which assets carry the risk. The table below summarizes the dominant hazards at each California site, with the highest projected severity band reached by the long-term horizon (2050) under the higher-emissions scenario. Severity is a five-band rating (Low, Moderate, High, Severe, Extreme).

A few points a reader should note from this table:

• Sea level rise applies only to the coastal sites. The Lathrop, Riverside, and Auburn sites are inland. For sites more than 50 kilometers from open water, sea level rise is not a relevant hazard, so we do not report a figure for it there. Reporting a sea-level number for an inland desert site would signal that the analysis was not site-specific.
• Wildfire concentrates in the foothills. The Auburn site sits in a fire hazard severity zone at the wildland-urban interface, where vegetation is combustible. The urban Long Beach and Hayward sites sit on built land, which carries a low wildfire rating regardless of temperature.
• Heat and water stress are broad. Extreme heat and water stress reach High or above at every inland site under the higher-emissions scenario by 2050.

Transition risks. As a diversified manufacturer, the company faces transition risks alongside physical ones. SB 261 defines climate-related financial risk to include both. For what climate-related financial risk covers and how physical and transition risk differ, see our overview. The main transition risks we track are:

• Energy and carbon costs. Rising energy prices and any future carbon pricing would raise the cost of running energy-intensive equipment.
• Product and demand shifts. Customers in some end markets may shift toward lower-carbon products and suppliers, which affects demand for parts of our range.
• Compliance cost. A widening set of climate-disclosure and product-standard rules raises the cost of compliance over time.

We treat transition risks as material over the medium to long term. This report gives them lighter quantitative treatment than physical risks, because our near-term measurable exposure is concentrated in the physical hazards above. We note this as a scope choice, not a judgment that transition risk is immaterial.

Strategy (b): Effect of these risks on the business, strategy, and financial planning

Identifying a hazard is only useful if it connects to a number. This subsection translates the hazards above into financial terms where the data supports it, and into exposure terms where it does not.

Flood-exposed sites: single-event loss estimates. For the three sites with meaningful flood exposure, we estimated the building loss from a flood at two return periods (a 1-in-100-year event and a 1-in-500-year event), at the 2050 horizon, under both scenarios. The estimates combine projected flood depth at each site with depth-to-damage relationships for industrial and commercial buildings, applied to each site’s replacement value. Figures are single-event losses, not annual averages, and cover direct damage to buildings and contents only.

In plain terms: under the higher-emissions pathway at mid-century, a single severe flood could damage roughly 10% to 25% of an exposed site’s value, depending on the site and the severity of the event. These are screening-level estimates, not insurance or engineering figures. The section “Where this disclosure is still developing” explains what they do and do not include.

Non-flood hazards: exposure rather than dollars. For wildfire, extreme heat, drought, and wind, there is no widely accepted dollar damage curve comparable to the flood curves above. For these hazards we report exposure, not loss: the share of site value sitting in a High-or-above hazard band, plus the operational consequence we expect.

• Extreme heat (Lathrop, Riverside). By 2050 under the higher-emissions pathway, both inland production sites reach Severe or Extreme heat ratings. The expected effect is reduced equipment efficiency, more cooling cost, and lost productive hours on the hottest days. Together these sites represent about $253 million of replacement value.
• Wildfire (Auburn). The Auburn site reaches the top wildfire band by 2050 under the higher-emissions pathway. The expected effect is direct fire risk, smoke-related shutdowns, and rising insurance cost. The site represents about $42 million of replacement value.
• Water stress (Lathrop, Riverside). Both inland sites sit in over-allocated water basins rated High for water stress across scenarios. The expected effect is higher water cost and possible restrictions on water-using processes.

Effect on strategy and financial planning. We use this analysis in three ways. First, capital planning: sites with higher long-term hazard ratings are reviewed for resilience investment before major capacity expansion. Second, site selection: new-site evaluations now include a hazard screen. Third, financial planning: the flood loss estimates inform our property insurance discussions and our internal reserves for weather-related disruption.

Strategy (c): Resilience of the strategy across climate scenarios

SB 261, through the TCFD framework, asks whether the strategy holds up under different climate futures, including a lower-warming scenario. We tested the California portfolio under two scenarios:

• A middle-of-the-road pathway, consistent with roughly 2.7°C of warming by 2100. This reflects current policy momentum without full decarbonization.
• A higher-emissions pathway, consistent with roughly 4.4°C of warming by 2100. This reflects limited further climate policy.

We report both because the gap between them is itself decision-useful. For most hazards, the two scenarios point the same direction; the higher-emissions pathway simply reaches the more severe bands sooner and more often. The flood loss table above shows the pattern clearly: at Long Beach, the same 1-in-100-year event drives roughly $8.5 million of loss under the middle pathway and roughly $15.2 million under the higher pathway by 2050.

What the scenarios tell us about resilience. The portfolio is not uniformly exposed. The coastal distribution function (Long Beach, Hayward) carries the flood and sea-level exposure. The inland production function (Lathrop, Riverside) carries the heat and water exposure. The foothill site (Auburn) carries the wildfire exposure. Because the exposures are spread across hazards and locations rather than concentrated in one, no single climate event threatens the whole portfolio at once. That spread is a source of resilience. The concentration of our highest-value asset (Lathrop) in a site with multiple High-or-above hazards is the main point of fragility, and it is the focus of our adaptation measures.

Risk Management

Risk Management (a): Processes for identifying and assessing climate-related risks

The company identifies physical climate risk through an annual, site-level hazard screen covering all California facilities, and separately its out-of-state sites. Each site is assessed across twelve physical hazards, under two climate scenarios, at three time horizons. The twelve-hazard taxonomy and underlying data layer are documented in the Continuuiti climate risk methodology. The screen produces a severity rating for each hazard and, for flood-exposed sites, a building-loss estimate. This is the analysis behind the Strategy and Metrics figures above. Transition risks are identified through a qualitative review of energy cost, regulatory, and market exposure, refreshed each reporting cycle.

Assessment prioritizes risks by two factors: the severity rating and the value of the asset exposed. A High-or-above rating at a high-value site, such as heat and flood at the Lathrop plant, ranks above a similar rating at a smaller site.

Risk Management (b): Processes for managing climate-related risks

Once a risk is prioritized, it is managed through one of three routes: a capital resilience project (for example, flood-proofing or added cooling capacity), an operational change (for example, water-use efficiency or wildfire defensible-space work), or risk transfer (property and business-interruption insurance). The specific measures in place at each site appear in the “Measures adopted to reduce and adapt” section.

Risk Management (c): Integration into overall risk management

Climate-related risks are not managed in a separate system. They sit in the same enterprise risk register the company uses for operational, financial, and compliance risks, and they compete for capital through the same approval process. This integration is deliberate. It keeps climate risk visible alongside the other risks the business manages, rather than isolating it in a sustainability report.

Metrics and Targets

Metrics (a): Metrics used to assess climate-related risks

This is the quantitative core of the report. The single table below is the metric we consider most decision-useful for physical risk: a view of each California site, its dominant hazard, the share of site value in an elevated-risk band, and the flood loss estimate where one exists. It is built from the Strategy analysis above and stated at the 2050 horizon.

How to read the totals. Across the three flood-exposed sites, a 1-in-100-year flood at the 2050 horizon under the higher pathway implies roughly $37.8 million of single-event building loss. What matters is that the exposure is now located, sized, and split by hazard, so it can be managed asset by asset. By 2050 under the higher-emissions pathway, essentially all of the company’s California property value sits in a High-or-above band for at least one physical hazard. That is not alarming on its own; it reflects operating in California, where heat, drought, wildfire, and flood are all present.

Metrics (b): Greenhouse gas emissions

SB 261 follows the TCFD recommendation to disclose greenhouse gas (GHG) emissions where appropriate. The figures below are illustrative and reported by scope, the standard way of organizing emissions. Scope 1 covers direct emissions from owned operations. Scope 2 covers emissions from purchased energy. Scope 3 covers indirect emissions across the value chain.

Our Scope 1 and Scope 2 figures are measured from operational data. Our Scope 3 figure is an estimate built from purchased-goods and transport data, and it is still developing. Section 38533(b)(4) provides that CARB may consider GHG claims that are verified by an independent third party. We note that our emissions are not yet third-party assured.

GHG emissions sit on the transition side of climate risk. This report gives them lighter treatment than physical risk, consistent with where our measurable exposure is concentrated.

Metrics (c): Targets

We report two kinds of targets. Resilience targets address physical risk and receive the emphasis here. Emissions targets address transition risk and are still being set.

Resilience targets (the focus of this report):

• Complete a site-level adaptation plan for every California site rated High or above for any hazard by the end of 2027.
• Reduce the share of high-value asset value exposed to a 1-in-100-year flood, through site-level measures at Lathrop and Long Beach, with progress reported in the next biennial report.

Emissions target (developing):

• We are setting a Scope 1 and Scope 2 emissions-intensity reduction goal and expect to disclose it, with a baseline year, in our next report. We flag this as an open item under Section 38533(b)(1)(B).

Measures adopted to reduce and adapt

Section 38533(b)(1)(A)(ii) requires a covered entity to disclose the measures it has adopted to reduce and adapt to its climate-related financial risk. This is a requirement SB 261 adds on top of the TCFD framework. The measures below follow directly from the site-level hazards quantified in the Strategy and Metrics sections.

On the transition side, the company is pursuing energy-efficiency upgrades at its production sites, which reduce both energy cost and Scope 1 and Scope 2 emissions. These measures are reported here at a summary level.

Where this disclosure is still developing

Section 38533(b)(1)(B) allows a reporter to make the recommended disclosures to the best of its ability, explain where they are incomplete, and describe how it will close the gaps. In that spirit, we are explicit about the limits of the analysis in this report.

• Dollar loss is estimated for flood only. The flood loss figures rest on established depth-to-damage relationships for buildings. For wildfire, extreme heat, drought, and wind, no comparably accepted dollar damage curve exists, so we report exposure (severity and share of value) rather than a dollar figure. We will extend dollar estimates to other hazards as accepted methods mature.
• The physical-risk analysis is screening-level. It is built for portfolio screening and site comparison, not property-level engineering. Climate data is modeled at roughly a 25-kilometer grid and flood projections at roughly a 1-kilometer scale, so the analysis cannot resolve individual buildings, local drainage, or flood defenses. Site-specific engineering studies would be needed before any single capital decision.
• Flood loss estimates carry wide uncertainty. They are point estimates from published curves, not actuarial models, and published research suggests actual loss can range from roughly one-third to three times the estimate. They cover direct building and contents damage only. They exclude business interruption, displacement, infrastructure, and environmental costs.
• Riverine and coastal flooding are assessed separately. The analysis does not model the two occurring together, which could understate risk where a site is exposed to both.
• Climate projections rely on a primary model with fallbacks. Using a single climate model does not capture the full spread across models. We treat the two-scenario comparison as the main tool for showing sensitivity.
• Scope 3 emissions and transition-risk quantification are still developing, as noted in the Metrics section.

We expect to narrow these gaps in the next biennial report.

Glossary

• AR6: the Sixth Assessment Report of the Intergovernmental Panel on Climate Change, source of the sea level rise projections used here.
• CARB: California Air Resources Board, the agency that administers and enforces SB 261.
• CDI: California Department of Insurance. Entities it regulates are carved out of SB 261.
• CMIP6: a standard set of global climate model projections used for the hazard analysis.
• CO2e: carbon dioxide equivalent, the unit for reporting greenhouse gas emissions.
• ERM: enterprise risk management, the company-wide system for tracking and managing risk.
• FABDEM: a bare-earth elevation dataset (buildings and trees removed), used for flood and terrain analysis.
• FHSZ: Fire Hazard Severity Zone, a California wildfire-risk designation.
• Freeboard: the height margin between a site’s ground level and a projected flood or sea level, after a tidal buffer.
• GHG: greenhouse gas.
• HAZUS: FEMA’s loss-estimation methodology, source of the depth-to-damage curves for US buildings.
• IFRS S2: the climate disclosure standard issued by the ISSB. SB 261 accepts it as an equivalent to TCFD.
• ISSB: International Sustainability Standards Board, which maintains the successor to the TCFD framework.
• JRC GloFAS: the European Commission’s global flood-hazard dataset, the baseline for riverine flood depth.
• PP&E: property, plant, and equipment, reported here at replacement value.
• Return period: the average interval between flood events of a given size. A 1-in-100-year flood has about a 1% chance in any year.
• Scope 1 / 2 / 3: direct emissions / purchased-energy emissions / value-chain emissions.
• SSP: Shared Socioeconomic Pathway, a standard climate scenario. This report uses a middle-of-the-road pathway and a higher-emissions pathway.
• TCFD: Task Force on Climate-related Financial Disclosures, whose four-part framework SB 261 incorporates by reference.
• WRI Aqueduct: the World Resources Institute’s water-risk and flood dataset.
• WUI: wildland-urban interface, where development meets wildland vegetation and wildfire risk concentrates.