ASTM Releases E2718-10: Standard Guide for Financial Disclosures Attributed to Climate Change

Author:Mr Barnes & Thornburg Climate Change And Environmental Law Practice Groups
Profession:Barnes & Thornburg

In February 2010, the United States Securities and Exchange Commission (SEC) released its Interpretive Release on Climate Change Disclosure (SEC Release). Subsequently, on April 1, 2010, ASTM International released E2718-10: Standard Guide for Financial Disclosures Attributed to Climate Change (Guide). The Guide is intended for voluntary use by reporting entities.

I. Purpose of the Guide

The purpose of the Guide is to assist publicly-traded companies in (1) identifying material financial impacts attributable to climate change that warrant disclosure in their financial statements, and (2) determining the appropriate content of the disclosure. The Guide states that it is designed to give instructions "consistent with good commercial and customary practice" for climate-change related disclosures accompanying audited and unaudited financial statements, and to encourage "consistent and comprehensive" disclosure of financial impacts attributed to climate change. The Guide is intended to apply to both domestic and international operations, at the discretion of the reporting entity.

The Guide focuses on when and how users may disclose material "financial impacts attributed to climate change" in "financial statements." It describes "financial impacts attributed to climate change" as encompassing material financial impacts on a reporting entity arising from climate change, including actual or anticipated regulatory burdens, changes in market conditions and physical harm to assets. The types of climate change-related impacts the Guide identifies include the same types of climate changerelated impacts the SEC Release suggests that reporting entities consider when making disclosures in SEC filings.

The Guide's definition of "financial statements" includes statements outside of SEC filings, statements associated with shareholder reporting, periodic reports, registration statements, and transactions such as financings and acquisitions.

II. Determining Whether Disclosure Is Warranted

To assist reporting entities in determining when disclosure of "financial impacts attributed to climate change" may be warranted, the Guide lists several examples of major climate change-related circumstances that may result in financial impacts. These examples include the following:

Predicted changes/trends in resource cost or availability; Predicted changes in corporate assets due to physical changes attributable to climate change, such as increases in the severity of storms; Contracts in...

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