At ICGN, we think that to produce reliable, comparable sustainable disclosures, the first key thing is that companies must be prepared to produce sustainability information, with strong governance, internal processes and controls for that. This is a crucial element to build trust for investors, but also to ensure that the information disclosed is verifiable, ready to be assured. Companies need to introduce rigorous processes to collect the data and document the information. There needs to be similar quality control as for traditional financial information. There must be Board oversight over this process and sign off of the results by the Board. Audit Committees should demonstrate competence for the oversight of sustainability and how this impacts the financial statements.

Once that reporting is prepared by the company, assurance is the next step. Sustainability reporting covers a broad range of very complex topics, so auditors and other assurance providers will need to build capacity and the necessary expertise to assure this information. An important part of sustainability data is based on estimates and/or dependent on other companies’ reporting. Some of the information is forward looking. Methodologies are still under development, and for some topics there is a lack of clear quantifiable metrics (e.g. human rights). This is a new and difficult territory for assurance providers. So, firms need to build the right capability, with appropriate training and resourcing.

Quality matters – reflections on the assurance of sustainability reporting market

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Quality matters – reflections on the assurance of sustainability reporting market

Will Farrell

Federated Hermes
Assistant Manager, EOS
London

Will co-leads the climate change theme at EOS, the stewardship arm of Federated Hermes Limited, where his coverage includes companies in Europe and Australia, primarily financial services, energy, chemicals, and materials. Prior to joining EOS, Will worked in the energy and infrastructure investment banking team at Macquarie Capital, where he specialised in renewable energy. Before that, Will held a number of roles across the UK climate policy space, including as a parliamentary researcher for Rt. Hon. Chris Skidmore MP on climate and energy issues, and as a climate and economic policy analyst at a diplomatic institute. He was appointed as a voluntary adviser to Rt. Hon. Alok Sharma MP, President of COP26, on preparations for COP26 after co-founding a Westminster climate policy group in 2019, which engaged MPs and Members of the House of Lords to advocate for more ambition on climate action in public policy. Will has a Bachelor’s degree (1st Class Honours) in Economics from the London School of Economics and Political Science.