What’s happening in ESG reporting & assurance today? Top 5 Takeaways from the CAQ Symposium
Thursday, October 28, 2021
In the last year, there has been rapid movement in the ESG reporting and assurance space. What are some of the key trends happening today when it comes to ESG reporting and assurance? What should companies and public company audit firms be prepared for? These are some of the topics we tackled at the annual CAQ Symposium. Here are our top takeaways:
Regulatory movement around mandatory disclosures is progressing rapidly. Panelists discussed some of the changes coming on the horizon. Regulatory changes are focused on mandating disclosure, and in some regions mandating assurance. In the U.S., the SEC is beginning to consider both climate and human capital disclosures.
We’re seeing an increased push towards a more comprehensive ESG reporting system. Despite the lack of uniformity of frameworks and standards in ESG reporting today, ongoing regulatory changes and the work that leading sustainability framework and standard setters are already doing to come together could mean that we’re slowly moving towards a more unified system of reporting. Neil Stewart, Value Reporting Foundation, provides an overview what is being done to bring us to a standard that is comparable across industries, consistent, and helps provide reliable information.
In our comment letter to the SEC addressing climate change disclosure, the CAQ also voiced support for a globally accepted ESG reporting system built from existing standards and frameworks, which can then be adapted to meet the needs of investors locally.
Investors are already beginning to look at how best to incorporate ESG information when making investment decisions. With increasing demand for sustainable investments comes a growing need for reliable ESG information. Jessica Mann, Wells Fargo Asset Management, touched on how reliable ESG information is critical in building ESG portfolios for investors, particularly as these types of investments are seeing increased demand.
Companies should start thinking now about how to establish effective governance over ESG reporting. Given the movement that is happening to mandate disclosures, it’s important to begin thinking about what needs to be implemented before disclosure is mandatory. Know who owns the data you need and where to obtain it to ensure it enters the reporting process. Companies should also be prepared to establish internal controls to ensure the accuracy of that data.
Having ESG information assured by public company auditors can be beneficial to those viewing ESG reports because they can trust that information is accurate and reliable. Auditors are uniquely qualified to assure this information. Roughly 6% of S&P 500 companies receive assurance from a public company auditing firm over some of their ESG information, and given regulatory movement towards mandated disclosures the role of the auditor in this space is expected to increase. To help increase the reliability of ESG information presented, auditors are currently largely performing assurance engagements over select ESG metrics but they also perform assurance engagements over full ESG reports. Antonia Chong, Deloitte & Touche LLP, touches on why public company auditors can be beneficial in providing assurance.