On the Importance of Assurance in Carbon Accounting

21 Pages Posted: 25 Mar 2024

See all articles by Florian Berg

Florian Berg

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Jaime Oliver Huidobro

Clarity AI Europe S.L.

Roberto Rigobon

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: February 23, 2024

Abstract

Firms that obtain assurance for their carbon accounting report on average a 9.5% higher carbon intensity than their peers. When controlling for assurance, we do not find evidence that SBTi target setters reduce their future emissions. Instead, firms that obtain assurance reduce their future carbon intensity by 3.3%. This has implications for portfolio managers and ESG raters as taking reported carbon emissions at face value would lead to penalizing firms that are more serious about their carbon reductions. It also calls for mandatory assurance when carbon reporting is mandatory and when reported emissions are generally relied upon in regulation.

Keywords: Auditing, Carbon Emission Targets, Carbon Accounting

JEL Classification: Q54, Q56

Suggested Citation

Berg, Florian and Oliver Huidobro, Jaime and Rigobon, Roberto, On the Importance of Assurance in Carbon Accounting (February 23, 2024). Available at SSRN: https://ssrn.com/abstract=4734240 or http://dx.doi.org/10.2139/ssrn.4734240

Florian Berg (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

Jaime Oliver Huidobro

Clarity AI Europe S.L. ( email )

Madrid, Madrid
Spain

Roberto Rigobon

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E52-447
Cambridge, MA 02142
United States
617-258-8374 (Phone)
617-258-6855 (Fax)

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