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Carrión Moneo, Elena Larrinaga González, Carlos Mateo Márquez, Antonio Jesús 2025-12-11T11:47:30Z 2025-12-11T11:47:30Z 2024-01 978 1 80392 059 7 978 1 80392 058 0 https://hdl.handle.net/10259/11119 10.4337/9781803920597.00014 Companies’ financial statements reflect climate change when environmental costs are internalized. However, financial accounting does not capture externalities (i.e., the unintended environmental costs that companies produce with their activity). This chapter explores the financial implications of climate change to understand the extent to which accounting numbers provide the appropriate information about required substantive ecological transitions. We draw on full cost accounting (FCA) to illustrate the bi-directional impacts of climate change. Outside-in impacts hold strong financial implications, which are materialized in financial statements by using accounting systems, such as carbon pricing mechanisms or sustainability reporting standards. In contrast, inside-out impacts have weak financial implications. Examples include voluntary initiatives and environmental standards, which are accounted in the corporate strategy although not captured in the financial statements. We conclude that FCA is an accounting tool that can provide a broader perception of the impacts that companies produce on the environment. eng http://creativecommons.org/licenses/by-nc-nd/4.0/ info:eu-repo/semantics/openAccess Attribution-NonCommercial-NoDerivatives 4.0 Internacional Climate change Externalities Financial accounting Full cost accounting Inside-out impacts Outside-in impacts Sustainability reporting Financial accounting and the natural environment: the case of climate change info:eu-repo/semantics/bookPart