The ESG reporting and assurance landscape is rapidly changing, with many stakeholders looking at how to navigate the changes. It’s a moment that demands new levels of trust in disclosure and decision-making. Regulatory bodies like the EU, ISSB, and US SEC are establishing standards and frameworks, leading to concerns by some about fragmentation.
We are at a critical moment in this journey. Its important for investors to be armed with latest developments, and prepared for the unprecedented speed of standard-setting for ESG disclosures.
The 2024 edition of KPMG’s ESG Assurance Maturity Index shows that some progress in ESG Assurance readiness has been made – but nevertheless, many organizations are still in the early stages. The time has come for a concerted focus on putting in place the necessary systems, processes and controls to gather the data required, and aim to ensure these are sufficiently robust to stand up to external assurance.
To build on these insights, I was delighted to moderate the KPMG panel discussion at the International Corporate Governance Network (ICGN) conference in London, to help shed light on these evolving expectations, including board and audit committee oversight, reasonable vs limited assurance over ESG data, and the potential increase in modified opinions.
The discussion aimed to equip the largely investor audience with the knowledge and tools needed to navigate the complex terrain of ESG reporting and assurance effectively. But what about those investors? What is their perspective on ESG reporting and assurance and what are they looking for? We heard some really interesting views in the discussion at the ICGN.
“Whether you’re a regulator, investor, assurer, a preparer, a board member, a standard setter, the skills that are needed to do the job today are very different from where they were even just a few short years ago.”
- Mike Shannon, Global Head of ESG Assurance, KPMG International
“For me, ESG assurance is really just the final step in the process of getting good high quality sustainability disclosures. So a lot of our [Fidelity International] dialogue with management at the moment is really around their assessment of what is material, how are you making those judgements.”
- Jenn-Hui Tan, Chief Sustainability Officer, Fidelity International.
“To date, most engagements have been limited assurance, the world will gradually move to reasonable assurance. Because this is moving into the mandatory space, a lot of this is going to be driven by regulators. However, it must be remembered of paramount importance, are the needs of the users.”
- Will Botha, Program & Technical Director, International Auditing and Assurance Standards Board
The conference highlighted the importance of having the right processes, controls, and systems in place to produce high-quality information and the role of the audit committee in responding to ESG disclosures. It was also noted that there is a high likelihood that initial assurance reports, whether limited or reasonable, will be modified.
“What is going to happen when all these opinions are issued? It is likely that a significant number of these opinions could be in some way modified, so the sector will have to pay attention and do some learning of what is the difference between a modified opinion, scope limitation and a disclaimer.”
- Jen Sisson, CEO, ICGN
“Frankly, the expectation is that when these assurance reports are issued for the first time, whether they be limited or reasonable, there’s a higher likelihood that these reports will be modified.”
- Larry Bradley, Global Head of Audit, KPMG
“The first is the speed and pace of change is increasing for everybody, so companies really should) get to grips with if they have the right processes, controls and systems in place to produce high quality information. Do they have the right governance in place? Is the audit committee ready to respond to these ESG disclosures and connecting them to their financial reporting.”
- Cath Burnet, Head of Audit, KPMG UK
We are entering a key phase on the path to ESG assurance. There is still time to prepare — but there is also little time to lose, and investors have critical contributions to make.
Organizations need help navigating these changes, but with a human touch. We look forward to continuing our work with the ICGN and their important dialogue with the global investor community.
KPMG is committed to sharing our insights and knowledge to support our clients, people, the investor community and wider stakeholders.
To learn more see KPMG’s 2024 ESG Assurance Maturity Index and Clear on climate reporting hub.
