ESG Assurance in the United States

Abstract

We provide the first, large sample evidence on firms’ voluntary, third-party verification of environmental and social metrics in ESG reports (“ESG assurance”) in the United States. Focusing on S&P 500 firms from 2010-2020, we document a striking increase in ESG assurance. Unlike financial audits, there is significant heterogeneity in many dimensions of ESG assurance within the ESG report, including choice of metrics assured, level of assurance, and assuror identity, among others. We show that firms’ decisions to obtain ESG assurance is primarily driven by their adoption of ESG reporting frameworks, such as GRI, and to a lesser extent, peer effects. On the contrary, firm characteristics documented in prior literature—which primarily uses international settings and early periods—are not primary determinants. Overall, the evidence suggests that assuror expertise in ESG reporting frameworks and measurement standards relates to assurance and supports the disclosure of environmental and social metrics in ESG reports.

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