Now that the SEC has indicated that public companies should be considering climate change in evaluating financial risks, the pressing questions include what should be evaluated and how it should be reported. ASTM’s newly released standard on Financial Disclosures Attributed to Climate Change, E2718-10 may be just the thing. The standard, which has been under development for the last 2 years, provides guidance on processes for identifying, quantifying and disclosing potential material impacts related to climate change, both the benefits and liabilities.
As with much in financial disclosures, the trick is to find the right balance. ASTM notes that it will not be possible to eliminate uncertainty regarding the financial impacts of climate change, and cautions that subsequent disclosures should not be used to criticize previous disclosures, which hindsight and new standards may paint with an unfairly harsh light. ASTM has also acknowledged that the costs to obtain information about the financial impacts of climate change should not outweigh the benefits of the information, but that it is important to use all of the relevant and reasonably ascertainable information a company can access.