{"id":94,"date":"2017-03-21T15:59:39","date_gmt":"2017-03-21T22:59:39","guid":{"rendered":"http:\/\/www.cleanfinancials.com\/Blog\/?p=94"},"modified":"2017-03-21T16:08:56","modified_gmt":"2017-03-21T23:08:56","slug":"disclosure-environmental-risks","status":"publish","type":"post","link":"https:\/\/www.cleanfinancials.com\/Blog\/2017\/03\/21\/disclosure-environmental-risks\/","title":{"rendered":"Considerations for Directors of Public Companies on the Disclosure of Environmental Risks and their Management"},"content":{"rendered":"<p>Acceleration of climate change is increasing business risks and opportunities related to the economic transition to a low carbon economy, and potential direct and indirect operational impacts. The <a href=\"https:\/\/www.fsb-tcfd.org\/publications\/recommendations-report\/\">Recommendations<\/a> of the Task Force on Climate-related Financial Disclosures (TCFD) frame the issues cogently &#8211; so far as existing disclosure requirements go. One of the critical unanswered questions is noted in Section E &#8211; Key Issues Considered and Areas for Further Work, Paragraph 8 &#8211; Time Frames for Short, Medium, and [most importantly] Long Term.<\/p>\n<p><strong>Time-Frame Challenge<\/strong>: Although climate change is underway, specific material risks and opportunities for a business may or may not currently be reasonably probable or estimable. Investors, boards of directors, and management should consider defining a reasonable time horizon for disclosure of material environmental risks, considering the availability and quality of measurement.<\/p>\n<p><strong>Evaluation<\/strong>: Prerequisite to disclosure would be internal analysis of environmental risks and opportunities. Boards of directors should be considering:<\/p>\n<ul>\n<li>How is the company identifying, measuring and managing material environmental risks and opportunities, specifically:\n<ul>\n<li>Timeframe \/ outlook \u2013 how far ahead?<\/li>\n<li>Economic transition to low carbon economy \u2013 positioning and strategy?<\/li>\n<li>Operations \u2013 assessment of direct and indirect impacts broadly defined?<\/li>\n<li>Quantitative \/ qualitative measurements \u2013 what and how? Auditable?<\/li>\n<li>Context \u2013 comparability, benchmarking, targets?<\/li>\n<li>Contingencies \u2013 measurable risk and ill-defined uncertainties?<\/li>\n<li>Counterparty \/ public risk \u2013 reliance on others (suppliers, insurers, lenders, etc.) \/ public infrastructure \u2013 and risks \/ impacts of failure?<\/li>\n<li>Assumptions and Ranges \u2013 what critical assumptions and ranges of estimates are being used? How often updated, given rapid changes?<\/li>\n<\/ul>\n<\/li>\n<li>Can the company\u2019s long-term climate-related liabilities be reasonably estimated?\n<ul>\n<li>Is fair value measurement (FASB ASC 820) applicable?<\/li>\n<li>TCFD recommendations include scenario-based analysis (consider accounting for contingencies, FASB ASC 450).<\/li>\n<li>Is it reasonable to develop probabilistic estimates using long-term forecasts of potential impacts of identified risks and opportunities above a materiality threshold, indicating annualized estimates of cost ranges and probabilities?<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><strong>Disclosure<\/strong>: Boards of directors may want to address the large volume of requested ESG disclosure surveys by identifying and focusing on only material factors. Industry-based approaches such as SASB\u2019s encourage uniformity of disclosure standards by industry, perhaps offering a measure comfort in meeting a reasonable level of disclosure. Disclosure standards will likely evolve rapidly based on regulations, legal decisions, industry practices and stakeholder demands. Best to give this deep consideration in advance&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Acceleration of climate change is increasing business risks and opportunities related to the economic transition to a low carbon economy, and potential direct and indirect operational impacts. The Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) frame the &hellip; <a href=\"https:\/\/www.cleanfinancials.com\/Blog\/2017\/03\/21\/disclosure-environmental-risks\/\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[21,6,3,13,19],"tags":[],"class_list":["post-94","post","type-post","status-publish","format-standard","hentry","category-climate-change","category-corporate-environmental-risk-management","category-environmental-risks-and-liabilities","category-environmental-sustainability","category-resilience"],"_links":{"self":[{"href":"https:\/\/www.cleanfinancials.com\/Blog\/wp-json\/wp\/v2\/posts\/94","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.cleanfinancials.com\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cleanfinancials.com\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cleanfinancials.com\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cleanfinancials.com\/Blog\/wp-json\/wp\/v2\/comments?post=94"}],"version-history":[{"count":4,"href":"https:\/\/www.cleanfinancials.com\/Blog\/wp-json\/wp\/v2\/posts\/94\/revisions"}],"predecessor-version":[{"id":96,"href":"https:\/\/www.cleanfinancials.com\/Blog\/wp-json\/wp\/v2\/posts\/94\/revisions\/96"}],"wp:attachment":[{"href":"https:\/\/www.cleanfinancials.com\/Blog\/wp-json\/wp\/v2\/media?parent=94"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cleanfinancials.com\/Blog\/wp-json\/wp\/v2\/categories?post=94"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cleanfinancials.com\/Blog\/wp-json\/wp\/v2\/tags?post=94"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}