Sustainability Assurance Matters: Building Momentum Against Greenwashing

November 17th, 2022 | David Madon, Kaylynn Pippo

Environmental, Social and Governance (ESG) investing continues to soar. Bloomberg Intelligence estimates assets will surge from US$35 trillion to US$50 trillion in the next three years. 

These figures don’t include the exploding global sustainable debt market. According to research from the Chartered Professional Accountants (CPA) Canada and the International Federation of Accountants (IFAC), issuances of green, social, sustainable and sustainability-linked bonds hit a record high of US$1 trillion in 2021 and are projected to hit US$1.35 trillion this year.

In both cases, investors are making capital allocation decisions based on the largely voluntary disclosure of sustainability information – information that, in its current state, many find difficult to trust. Organizations can currently pick and choose what metrics to report, focus on favourable elements, and portray themselves as more “sustainable” than they actually are – all leading to concerns about greenwashing.

While one study indicates that more than 90 percent of the largest public companies are disclosing sustainability information, only 58 percent are having this information verified, but not necessarily by accountants – who are arguably best placed to assure financial information. As a result, many investors are turning to independent analysis from ESG ratings and data providers to come up with their own criteria to make investment decisions. 

When it comes to sustainable debt, investors must consider how issuers are determining sustainability metrics and whether those metrics effectively measure the instrument’s performance, in addition to whether and how this information is being assured.

High-quality sustainability information that is transparent and independently verified is necessary to mitigate greenwashing and ensure investors can make sound investing decisions. With so much capital on the line, sustainability disclosure must be as high-quality as corporate disclosures.

Where sustainability assurance is today

IFAC, in collaboration with the AICPA-CIMA, conducted a State of Play benchmarking study that reviewed sustainability-related reporting and assurance practices of 1,400 large public companies across 22 jurisdictions. 

The findings are telling. Most assurance is limited in nature and assurance practices and providers vary globally – potentially creating an expectation gap between what investors expect compared to the reality, suggesting there is room for improvement. Highlights include:

  • More than 90 percent of companies provide some sustainability information, but only 58 percent of companies provide assurance on sustainability information, and in many cases the assurance is only for a portion of the reported information
  • When professional accountancy firms are engaged, 94 percent of the time they use standards from the International Auditing and Assurance Standards Board (IAASB), the organization that sets global standards for auditing, assurance and quality management. The majority of engagements by other service providers use other standards. 
  • There are two levels of assurance: limited and reasonable. Currently, more than 80 percent of sustainability assurance engagements result in limited assurance, which provides a meaningful level of assurance, although less than the level of assurance obtained in a financial statement audit. CPA Canada’s  Sustainability assurance alert: Third-party assurance over sustainability information offers a deeper dive into the topic.

The world is moving towards a common set of sustainability standards

Nearly 20 years after the UN’s landmark initiative “Who Cares Wins” introduced the term ESG, the need for companies to report sustainability information is well understood both by investors and companies of all sizes across industries and jurisdictions. Less clear is how to undertake this reporting given the number of varying voluntary frameworks and guidelines, which have created complexity and confusion for issuers. 

To create a global baseline for sustainability disclosures and ensure investors have access to high-quality, consistent and comparable sustainability-related reporting, in November 2021 the IFRS Foundation launched the International Sustainability Standards Board (ISSB), which will operate in concert with the International Accounting Standards Board. 

The ISSB is moving quickly. In March 2022, it released exposure drafts for its two initial standards: IFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information establishes overall requirements for disclosing all of an entity’s significant sustainability-related risks and opportunities. IFRS S2 – Climate-related Disclosures sets out the specific requirements to identify, measure and disclose climate-related information. 

Meanwhile, jurisdiction-specific reporting initiatives are also taking shape, with the European Union being furthest along in its journey. In Canada, a Canadian Sustainability Standards Board (CSSB) was announced in June 2022 and aims to be operational by April 2023. On the regulation front, the Canadian Securities Administrators and the U.S. Securities and Exchange Commission are each moving forward with its own proposals to improve and standardize sustainability reporting. Global regulators are part of jurisdictional working groups to minimize differences to the greatest extent possible.

Momentum is building for mandatory sustainability assurance standards

The IAASB is developing a standalone, overarching standard on sustainability assurance, which it aims to release in the second half of 2023 for public comment. It will build on existing IAASB standards and guidance and be designed to assure information reported across all sustainability topics, information disclosed about those topics, and reporting frameworks. 

The International Organization of Securities Commissions (IOSCO) has acknowledged the important efforts of the IAASB, working in cooperation with the International Ethics Standards Board for Accountants (IESBA), stating “This work will serve to support the consistency, comparability and reliability of sustainability-related information provided to the market, enhancing trust in the quality of that information.”

The U.S. and EU are already moving towards setting reasonable assurance as the level of assurance needed for this type of reporting. If the markets are going to treat sustainable information as being as important as financial information, then assurance needs to rise to that level as well. 

Final thoughts

Investors have been a powerful voice in the drive towards high-quality sustainability reporting standards. Now it’s time to focus on the assurance of this reporting to ensure sustainability information is as consistent, comparable and trusted as financial information. We encourage you to follow CPA Canada and IFAC initiatives in the ESG space. Share your insights and engage. Respond to consultations. This is how positive change happens.

RIA Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not necessarily reflect the view or position of the Responsible Investment Association (RIA). The RIA does not endorse, recommend, or guarantee any of the claims made by the authors. This article is intended as general information and not investment advice. We recommend consulting with a qualified advisor or investment professional prior to making any investment or investment-related decision.


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David Madon

Director of Sustainability, Policy and Regulatory Affairs
IFAC (International Federation of Accountants)

David Madon joined IFAC (International Federation of Accountants) in 2019, where he is director of Sustainability, Policy and Regulatory Affairs. He is responsible for developing and co-ordinating IFAC’s sustainability policy and advocacy activities in addition to conducting research, policy development and engagement with respect to a range of topics and stakeholders, including industry organizations, regulators, public authorities and institutional investors. David's areas of expertise include sustainability/ESG, corporate reporting, financial audit quality/reform, sustainability assurance, ethics, investor protection, financial market regulation and credit markets. Most recently, he has focused on the development of a global reporting system (including assurance) for sustainability/ESG information. Prior to IFAC, David represented the IFRS Foundation in the United States for nearly a decade, during which he focused on building institutional investor relationships, funding-raising, and the adoption of IFRS Standards by U.S. publicly traded companies. Prior to his public policy work, David spent 25 years in financial services, most recently as a managing director at Dresdner Kleinwort Wasserstein. He holds a Masters in Public Administration-MC from the Harvard Kennedy School, an MBA in Finance from the University of Chicago Booth School of Business and a BS in Management-Accounting from Purdue University Northwest.

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Kaylynn Pippo

Acting Director, Research, Guidance and Support
CPA Canada

Kaylynn is an acting director at CPA Canada within the Research, Guidance and Support group. In this role, she oversees the development of guidance and thought leadership for CPAs related to audit and assurance matters. This includes implementation guidance for new and complex audit and assurance standards; resources regarding the impact of technology on the audit and assurance profession, including data analytics, blockchain and crypto-assets; and assurance implications of emerging forms of external reporting. Prior to joining CPA Canada, Kaylynn was a Senior Manager at KPMG LLP in their Risk Consulting practice, focusing on internal audit, risk and control services. Kaylynn started her career with KPMG's audit practice, focusing on financial statement audits of public companies in manufacturing, retail and industrial markets.