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Building Trust in Sustainable Investments: The Role of Assurance in Greenhouse Gas Reporting
As climate concerns continue to shape global financial markets, investors are increasingly prioritising sustainability and ethical considerations in their decision-making. One critical aspect of this movement is Greenhouse Gas (GHG) reporting, which allows businesses to disclose their carbon emissions. However, for these reports to be effective, they must be credible, transparent, and reliable.

A recent study, "Influence of Level of Assurance, Assurance Provider Type, and Investors’ Personality in Greenhouse Gas Reporting for Socially Responsible Investment," published in the Journal of Accounting & Organizational Change, examines how assurance providers, assurance levels, and investor personality traits influence investment decisions in sustainable finance.

Why Assurance Matters in GHG Reporting
Companies voluntarily report their GHG emissions to demonstrate their commitment to sustainability. However, without third-party assurance, investors may question the accuracy and credibility of these disclosures. Assurance providers—including accountants, engineers, and environmental specialists—help verify these reports and enhance investor confidence.

The study found that investors prefer accountants as assurance providers over engineers and environmental specialists. This is due to the stringent quality controls and financial accountability standards associated with the accounting profession. However, engineers and environmental specialists bring technical expertise, making their insights valuable in specific industries.

Additionally, the level of assurance—reasonable, hybrid, limited, or unspecified—affects investor trust. The study indicates that reasonable assurance, which provides the highest level of verification, significantly increases investment confidence. In contrast, limited or unspecified assurance raises concerns about reliability, making investors less likely to commit funds.

How Personality Traits Influence Investment Decisions
Beyond assurance factors, an investor’s psychological makeup also plays a role in sustainable investment decisions. The study analysed how the Big Five personality traits—openness, conscientiousness, extraversion, agreeableness, and neuroticism—impact reactions to GHG reports.

Investors with high openness, conscientiousness, and agreeableness are more likely to trust reasonably assured reports and engage in socially responsible investments. They tend to value transparency and data-driven decisions.

Conversely, those with high extraversion and neuroticism are less dependent on assurance reports and more influenced by emotions or market trends. This suggests that personality-driven biases can affect how investors interpret sustainability disclosures.

Practical Applications for Businesses and Investors
The findings offer valuable insights for companies, investors, and regulators:

For Businesses: Companies should prioritise reasonable assurance and consider the expectations of different investor groups when choosing assurance providers. While accountants are preferred, integrating engineering and environmental expertise can enhance report credibility.

For Investors: Investors should assess their own decision-making biases and prioritise reports with higher assurance levels to ensure credibility in sustainable investments.

For Regulators: Standardising assurance requirements for sustainability reporting could help create consistency and trust in the investment community.

Aligning with the Sustainable Development Goals (SDGs)
This research strongly aligns with United Nations Sustainable Development Goal (SDG) 13 – Climate Action, which promotes corporate accountability in environmental efforts. By ensuring greater credibility in GHG reporting, companies can attract investors committed to sustainable finance.

Additionally, the study supports SDG 12 – Responsible Consumption and Production, encouraging businesses to maintain transparency and integrity in sustainability disclosures.

Conclusion: Strengthening Investor Confidence in ESG Reporting
As environmental, social, and governance (ESG) concerns become more central to financial decision-making, trustworthy greenhouse gas (GHG) reporting is more important than ever. This study explores how the type and level of assurance—along with the way investors think and feel—can shape sustainable investment choices. For businesses, offering strong, credible assurance can build trust and attract investors who care about responsibility. For investors, understanding how assurance and personal traits influence decisions can lead to smarter, more thoughtful investments. As sustainable finance continues to grow, reliable assurance in GHG reporting will help close the gap between corporate action and investor confidence.
 

Dr Hawariah binti Dal Nial
ºìÐÓÊÓƵ Business School
Email: @email 

Prof Dr Anna Azriati binti Che Azmi
Department of Accounting, Faculty of Business and Economics, University Malaya
Email: @email 

Prof Dr Anna Azriati binti Che Azmi
Department of Accounting, Faculty of Business and Economics, University Malaya
Email: @email