From Inside Public Accounting, an update on the rise in ESG assurance:
The number of global companies obtaining independent assurance on their environmental, social and governance (ESG) information increased from 51% in 2019 to 58% in 2020, according to new data from the AICPA, International Federation of Accountants and Chartered Institute of Management Accountants (CIMA). The 2020 information released Aug. 1 is an update to the accounting bodies’ inaugural study last year. A follow-up study that incorporates 2021 information is expected to be released at a later date.
– Some 61% of assurance engagements were performed by audit firms on a global basis, a slight decline from the previous year (63%). Jurisdictions with some of the highest rates of assurance performed by professional accountants include Australia, France, Italy, Germany and Spain. In other countries, including South Korea, the United Kingdom and the United States, most assurance work is conducted by service providers outside the accounting profession.
-The study shows 89% of companies presented at least some information on greenhouse gasses, other environmental factors, social and governance, yet only 43% provided assurance for all four categories. The most common area for independent assurance was greenhouse gases (95%).
– Seventy percent of global companies that hired a professional accounting firm to perform the ESG assurance engagement chose the firm that audits their financial statements.
Our view: Yes, this data is perhaps a bit stale but there is no reason to think it doesn’t reflect 2022 trends – and beyond. Given the emphasis accounting firms are putting on anticipated future growth in ESG services, they also expect to see more work in this space. Reporting companies need to be sure they hire auditors/firms that are properly qualified in technical E & S subject matters and that still meet auditor independence requirements. It wouldn’t be prudent to get complacent on either of those points – ESG reports and related assurances will be carefully reviewed and criticized by many stakeholders. Our checklist “Considerations in Selecting an ESG Advisor or Auditor” is available to PracticalESG.com members.