The International Corporate Governance Network (ICGN) has published a guide on assurance of sustainability reporting for investors, which stresses the need for global standards and strong regulatory oversight.
In the guide – ICGN investor viewpoint: The assurance of sustainability reporting – the investor body advises that sustainability reporting will soon need to meet the same diligence and ethical standards expected from financial statements.
It sets out investors’ expectations on the preparation of sustainability reporting and the quality of external assurance.
Additionally, it offers a range of questions that investors can ask company boards, as part of their own stewardship dialogue.
“In the future, investors are likely to increasingly hold company boards accountable if sustainability reporting is not prepared with the same rigour and ethical approach as financial statements,” said ICGN’s global policy director, Severine Neervoort.
The guide comes as numerous jurisdictions are adopting mandatory requirements for companies to report sustainability information, something investors have been calling for as the need for high-quality sustainability disclosures increases.
However, many investors are concerned that corporate sustainability disclosures may contain some unsupported claims. As a result, the ICGN has stressed the crucial role independent third parties will play in the assurance of sustainability reporting.
Global standards and strong regulatory oversight
The ICGN has also backed the work of the International Auditing and Assurance Standards Board (IAASB) in proposing a global baseline for sustainability assurance engagements and of the International Code of Ethics for Professional Accountants (IESBA) in developing an ethics framework for sustainability reporting and assurance, including independence standards. The plans were previously lauded by the manager of Norway’s sovereign wealth fund.
“We encourage national regulators to adopt these upcoming international standards, in order to have consistency in assurance engagements globally, regardless of who conducts the assurance,” ICGN said.
Neervoort went on to say: “Currently, we are in a transition period, where companies and assurance providers are building capacity, global standards are being adopted and must be implemented, and market participants are developing their understanding of sustainability assurance.
“Some experts anticipate a ‘wave’ of qualified opinions in the short term, and investors will need to decide how to interpret these assurance reports and engage constructively with companies.”
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