Accounting for the Financial Impacts of Climate Change: ASTM Steps Into the Breach
As the reality of climate change begins to hit home – and as the economy continues to weaken – one issue that may ultimately prove critical in how we respond may be how corporations account for the financial impacts of climate change. Now ASTM is getting into the act. ASTM is working on a standard, titled “Financial Disclosures Attributed to Climate Change,” to provide guidance on the issue.
ASTM has something of a track record in setting environmental standards. Its guidance on doing Phase I site assessments has dictated practice in that area to the point that it was essentially written into EPA’s brownfields regulations. Time will tell whether the financial disclosure standard has the same impact.
In any case, for those interested in learning more about the state of the ASTM process, Gayle Koch of the Brattle Group, who is on the ASTM work group preparing the standard has written a helpful summary of where ASTM appears to be headed. ASTM has recognized that it will not be possible to eliminate uncertainty regarding financial impacts of climate change. 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.
In summary, the guidance will likely require reporting of near term impacts that could be severe for the company, where the likelihood that such impacts will occur is more than remote. It’s hard to imagine how a guidance document such as this could be more specific – flexibility is obviously necessary and appropriate – but there is little doubt that CPAs and lawyers will have much to argue about concerning when this standard has been met.
