This new research from Carbon Tracker and the Association of Chartered Certified Accountants  reveals that current financial reporting standards, stock market listing requirements, industry reporting frameworks and non-financial guidelines do not alert investors to the risks of reserves associated with climate change.

In this first look at the reporting landscape of fossil fuel reserves, it is apparent extractive companies do not present the full picture of risks that some coal, oil and gas reserves may not be combusted. This report calls for carbon emissions levels to be considered against expected revenues to better identify assets potentially at risk of impairment.

Key Findings

The threat to financial and climate stability

The financial crisis raised ongoing concerns over whether markets can alert investors to systemic risks. In light of Carbon Tracker’s ‘Wasted capital and stranded assets’ analysis and the scale of unburnable fossil fuel assets it revealed, there is a clear need for markets to become more ‘climate literate’. At the heart of this is understanding the following question:

‘How much of the future revenues of companies in the extractives sector are dependent on future GHG emissions and to what extent can the values attributed to reserves be relied upon?’

To begin answering these questions, investors need more complete, forward-looking and integrated information on GHG emissions and fossil fuel reserves.


This report’s recommendations to help achieve this are structured along four facets of the reporting framework:


  • Companies need to start disclosing the following information in their annual reports:
  • Reserves and resources converted into potential carbon dioxide emissions
  • Sensitivity analysis of reserves levels in different price/ demand scenarios
  • Valuations of reserves using a range of disclosed price/ demand scenarios
  • Discussion of the implications of this data in the explanation of capital expenditure strategy and risks to the business model.

Financial Reporting Standard Setting Bodies

  • Issue guidance to interpret existing standards (eg IAS36 impairment of assets; valuation of reserves) so that preparers of reports and accounts consider the need to include information on the carbon viability of reserves.
  • Consider how the use of fair value accounting could reflect the potential impact on the value placed on reserves.

Stock Market Regulators and Listing Authorities

  • Integrate climate risk into processes considering systemic risks.
  • Require information in annual reports and listing prospectuses on the emissions potential of reserves, and the emissions trajectory assumptions of corporate strategy.
  • Require sensitivity analysis of how reduced demand and price could affect the fossil fuel reserves of a company.

Reserves Reporting Standard Setters

  • Integrate consideration of how emissions regulation and market dynamics could affect demand and price into the methodology for classifying reserves and producing a Competent Persons review.

Other Influential Reporting Guidelines

  • Develop technical guidance on reporting the greenhouse emissions potential of reserves to provide a forward-looking indicator, ensuring compatibility with financial reporting standards.
  • CDSB and SASB should ensure their approaches capture this material issue.
  • Ensure the IIRC brings together climate risks with how reserves are reported in integrated reporting.