ASTM E2718-10

Standard Guide for Financial Disclosures Attributed to Climate Change

SIGNIFICANCE AND USE
Uses—This guide is intended for use on a voluntary basis by a reporting entity that provides disclosure in its financial statements regarding financial impacts attributed to climate change. The degree and type of disclosure depends on the scope and objective of the financial statements. This guide is intended to apply to U.S. and international operations at the discretion of the reporting entity. The user should be aware that there may be contractual obligations, court decisions, or regulatory directives that may affect the flexibility in use of this guide. The user should also maintain an awareness of international regulations that may be relevant to disclosures, such as those of the International Accounting Standards Board and International Financial Reporting Standards.
Principle:
The following principles are an integral part of this guide and are intended to be referred to in resolving any ambiguity or dispute regarding the interpretation of financial disclosures regarding financial impacts attributed to climate change.
Uncertainty Not Eliminated—Although a reporting entity, as of the time when its financial statements are prepared, may have evaluated the existence and extent of financial impacts attributed to climate change, there remains uncertainty with regard to the final resolution of factual, scientific, technological, regulatory, legislative, and judicial matters, which could affect its financial impacts attributed to climate change. These uncertainties cannot be eliminated. While this standard recommends the development of reasonable scenarios or ranges to recognize and address uncertainties, it is unlikely that all climate change uncertainties will be foreseeable. However, it is likely that some financial impacts attributed to climate change are foreseeable and that alternatives, boundaries, or ranges of potential impacts can be assessed and quantified.
Comparison with Subsequent Disclosures—Subsequent disclosures that convey different inform...
SCOPE
1.1 Purpose—The purpose of this guide is to provide a series of options or instructions consistent with good commercial and customary practice for climate change-related disclosures accompanying audited and unaudited financial statements. This guide encourages consistent and comprehensive disclosure of financial impacts attributed to climate change.
1.2 Objective—The objective of this guide is to determine the conditions warranting disclosure and the content of appropriate disclosure.

General Information

• Status: Historical
• Publication Date: 14-Mar-2010
• ICS: 03.060 - Finances. Banking. Monetary systems. Insurance
• Technical Committee: E50 - Environmental Assessment, Risk Management and Corrective Action
• Drafting Committee: E50.05 - Environmental Risk Management

Relations

• Referred By: ASTM E2137-22 - Standard Guide for Estimating Monetary Costs and Liabilities for Environmental Matters
• Effective Date: 15-Mar-2010
• Referred By: ASTM E3032-22 - Standard Guide for Climate Resiliency Planning and Strategy
• Effective Date: 15-Mar-2010
• Referred By: ASTM E2173-22 - Standard Guide for Disclosure of Environmental Liabilities
• Effective Date: 15-Mar-2010

Standards Content (Sample)

NOTICE: This standard has either been superseded and replaced by a new version or withdrawn.
Contact ASTM International (www.astm.org) for the latest information
Designation: E2718 − 10
StandardGuide for
Financial Disclosures Attributed to Climate Change
This standard is issued under the fixed designation E2718; the number immediately following the designation indicates the year of
original adoption or, in the case of revision, the year of last revision. A number in parentheses indicates the year of last reapproval. A
superscript epsilon (´) indicates an editorial change since the last revision or reapproval.
1. Scope reports, registration statements, loans, mergers, acquisitions, or
divestitures. Financial statements may include statements out-
1.1 Purpose—The purpose of this guide is to provide a
side of SEC filings.
series of options or instructions consistent with good commer-
cial and customary practice for climate change-related disclo-
3.1.4 greenhouse gas—includes carbon dioxide, methane,
sures accompanying audited and unaudited financial state-
nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sul-
ments. This guide encourages consistent and comprehensive
fur hexafluoride.
disclosure of financial impacts attributed to climate change.
3.1.5 materiality—the significance of an item to users of a
1.2 Objective—The objective of this guide is to determine
financial statement that considers all relevant and surrounding
the conditions warranting disclosure and the content of appro-
circumstances. A material item is one that its omission or
priate disclosure.
misstatement is of such a magnitude in the surrounding
circumstances that either the judgment of a reasonable person
2. Referenced Documents
relying on the financial statement would have been changed or
2.1 ASTM Standards: influenced by its inclusion or correction, or there is a substan-
E2137 Guide for Estimating Monetary Costs and Liabilities tial likelihood that the item, after assessing the inferences, and
for Environmental Matters their significance, drawn from the given set of facts associated
E2173 Guide for Disclosure of Environmental Liabilities with the financial statement, would be viewed as significantly
altering the information made available to the investor or
3. Terminology
shareholder. (For additional information on materiality, see
Guide E2173.)
3.1 Definitions of Terms Specific to This Standard:
3.1.1 climate change—any change in climate over time
3.1.6 reporting entity—any business or public agency pre-
whether due to natural variability or as a result of human
paring a financial statement.
activity. (Definition from the Intergovernmental Panel on
3.2 Acronyms and Other Abbreviations:
Climate Change.)
3.2.1 FASB—Financial Accounting Standards Board
3.1.2 financial impacts attributed to climate change
3.2.2 GAAP—Generally Accepted Accounting Principles
—material financial impacts on a company’s performance,
operations, assets, and liabilities attributed to climate change 3.2.3 SEC—Securities and Exchange Commission
effects, including but not limited to real or expected risks of
physical damage to facilities, regulatory costs and incentives,
4. Significance and Use
and shifts in the market for products and services.
4.1 Uses—This guide is intended for use on a voluntary
3.1.2.1 Discussion—In this guide, the short form designa-
basis by a reporting entity that provides disclosure in its
tions of ‘financial impact’ and ‘impact’ are also used to
financial statements regarding financial impacts attributed to
designate this specific concept.
climate change. The degree and type of disclosure depends on
3.1.3 financial statement(s)—include, but are not limited to,
the scope and objective of the financial statements. This guide
statements associated with shareholder reporting, periodic
is intended to apply to U.S. and international operations at the
discretionofthereportingentity.Theusershouldbeawarethat
there may be contractual obligations, court decisions, or
ThisguideisunderthejurisdictionofASTMCommitteeE50onEnvironmental
Assessment, Risk Management and CorrectiveAction and is the direct responsibil- regulatorydirectivesthatmayaffecttheflexibilityinuseofthis
ity of Subcommittee E50.05 on Environmental Risk Management.
guide. The user should also maintain an awareness of interna-
Current edition approved March 15, 2010. Published March 2010. DOI:
tional regulations that may be relevant to disclosures, such as
10.1520/E2718–10.
2 those of the International Accounting Standards Board and
For referenced ASTM standards, visit the ASTM website, www.astm.org, or
contact ASTM Customer Service at [e-mail]. For Annual Book of ASTM
International Financial Reporting Standards.
Standards volume information, refer to the standard’s Document Summary page on
the ASTM website. 4.2 Principle:
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959. United States
E2718 − 10
4.2.1 The following principles are an integral part of this 5.1.1.2 Predicted changes/trends in resource costs or avail-
guide and are intended to be referred to in resolving any ability that may change a company’s products, processes,
ambiguity or dispute regarding the interpretation of financial and/or markets or services (including both positive and nega-
disclosures regarding financial impacts attributed to climate tive impacts).
change.
5.1.1.3 Predicted changes in a company’s assets due to
4.2.1.1 Uncertainty Not Eliminated—Although a reporting financial impacts attributed to climate change, including but
entity,asofthetimewhenitsfinancialstatementsareprepared,
not limited to changes in weather, sea levels, disease and pest
may have evaluated the existence and extent of financial levels, drought and fires, and resource availability (for ex-
impacts attributed to climate change, there remains uncertainty
ample, food, labor, energy, water).
with regard to the final resolution of factual, scientific, tech-
5.1.1.4 Contractualassumptionofriskorrisktransferagree-
nological, regulatory, legislative, and judicial matters, which
ments. The most familiar forms of risk transfer agreements are
could affect its financial impacts attributed to climate change.
insurance contracts, hold harmless agreements, indemnity
These uncertainties cannot be eliminated. While this standard
agreements, and similar terms within contracts for the transfer
recommends the development of reasonable scenarios or
of property or liabilities.
rangestorecognizeandaddressuncertainties,itisunlikelythat
5.1.1.5 Commencement of litigation or assertion of a claim
all climate change uncertainties will be foreseeable. However,
or assessment by a party alleging legal liability related to
it is likely that some financial impacts attributed to climate
climate change on the part of the reporting entity.
change are foreseeable and that alternatives, boundaries, or
5.1.1.6 Informationknownbythe reporting entityindicating
ranges of potential impacts can be assessed and quantified.
that financial impacts attributed to climate change have been
4.2.1.2 Comparison with Subsequent Disclosures—
incurred or are likely to be incurred.
Subsequent disclosures that convey different information re-
5.2 Sources of Information—This guide identifies standard
garding the extent or magnitude of the reporting
sources that should be reviewed by a reporting entity to
entity’sfinancial impacts attributed to climate change should
properly determine if conditions warrant disclosure. Such
not be construed as indicating the initial disclosures were
sources may include but are not limited to the following
inappropriate. Disclosures shall be evaluated on the reason-
categories:
ablenessofjudgmentsandinquiriesmadeatthetimeandunder
5.2.1 Publicly Available Environmental Record Sources—
the circumstances in which they were made. Subsequent
Anyenvironmentalrecordavailablefromagovernmentagency
disclosures should not be considered valid standards to judge
or commercial entity.
the appropriateness of any prior disclosure based on hindsight,
5.2.2 Internal Reporting Entity Records—The reporting en-
new information, use of developing analytical techniques, or
tity’s internal records regarding greenhouse gas emissions and
other factors. However, information on trends between disclo-
financial impacts attributed to climate change.
sure years may be of value to a user of financial statements.
5.2.3 Current and proposed foreign, national, state, and
4.2.1.3 Not Exhaustive—Appropriate disclosure does not
local environmental laws or rules related to climate change.
necessarily mean an exhaustive disclosure. There is a point at
which the cost of obtaining information or the time required to 5.2.4 Publicly available and internal studies on benchmark-
ing, modeling, trends, and forecasts.
gather it outweighs the usefulness of the information and, in
fact, may be a material detriment to the orderly preparation of
5.3 Estimation of Financial Impact Attributed to Climate
financial statements and the ability of readers to understand the
Change—Once a reporting entity has identified potential finan-
information contained therein. However, all relevant and rea-
cial impacts attributed to climate change, it should determine
sonably ascertainable information should be used to determine
whether these impacts (1) have a likelihood that is more than
the content of appropriate financial impacts attributed to
remote, (2) could have a severe impact that would disrupt the
climate change.
normal functioning of the entity or the entity’s financial
position, cash flows, or operations, and (3) are near-term,
5. Determining Whether a Disclosure is Warranted
occurring during the next year. If these criteria apply, the
5.1 Circumstances Associated with Financial Impacts At-
reporting entity should estimate the likelihood, magnitude, and
tributed to Climate Change:
timing of potential impacts to the entity’s financial position,
5.1.1 The following are examples of major circumstances
including assets, liabilities, and income. (For additional guid-
that might give rise to financial impacts attributed to climate
ance on estimating environmental costs and liabilities, see
change that may be subject to disclosure:
Guide E2137). Note that iIf the level of uncertainty or the time
5.1.1.1 Enforcement of laws or regulations regarding green-
horizon of the financial impact is determined to be too great to
house gas emission levels (for example, caps, trade systems,
allow meaningful estimation, disclosure may still be warranted
emission taxes), investigations, controls, resource use, technol-
as described below in Section 6.
ogy use, compliance, reporting, and other costs attributed to
climate change. This includes predicted changes in federal, NOTE 1—For longer-term financial impacts attributed to climate
change, the company should, when possible, estimate the likelihood,
state, and local regulations that are anticipated to have a
magnitude, and timing of potential impacts.
material effect upon the capital expenditures, earnings and
competitive position of the company and its subsidiaries, as 5.4 Estimation of Materiality—The
...