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Role of Assurance in Enhancing the Credibility of the Sustainable Debt Market

Learn about the role of the assurance profession in the rapidly growing and evolving sustainable debt market.

The issuance of sustainable debt instruments is on the rise globally and is showing no sign of slowing down. In 2021, a new record was set with almost US$1 trillion issuances of green, social, sustainable and sustainability-linked bonds. It appears that 2022 will be another record year, with issuances projected to reach US$1.35 trillion.

Growing demand from investors and increased pressure on organizations to integrate environmental, social and governance (ESG) factors into their strategies is driving this growth. However, this rapid growth does not come without risks and challenges.

CPA Canada, jointly with the International Federation of Accountants (IFAC), recently initiated research on the challenges and opportunities that exist in the sustainable debt market. The research report Navigating the Sustainable Debt Market: Enhancing Credibility in an Evolving Market provides extensive background on the sustainable debt market and identifies areas of consideration for various stakeholder groups to mitigate the risk of greenwashing and enhance the market’s credibility.

In this blog, we will highlight areas of our research relevant to the assurance profession and the topics covered include:

  • Considerations for assurance providers
  • What are sustainable debt instruments?
  • Who are the key players in this market?
  • Examples of the types of external reviews, including assurance engagements that exist
  • Challenges and opportunities for assurance providers
  • Additional resources on sustainability reporting and assurance
  • Information for financial statement auditors

Considerations for assurance providers

As you read through this blog, we encourage you, as assurance providers, to consider how the assurance profession could play a role in enhancing the credibility of the sustainable debt market. For example:

  • Can we engage with issuers and other key players, where appropriate, earlier in the issuance process to better set external reviews, including third-party assurance engagements, up for success?
  • Have we clearly communicated the type of engagement (including level of assurance obtained) to issuers and investors?
  • How could assurance services evolve to continue to meet the needs of issuers and investors in this growing market? How do we ensure we have the appropriate skills and expertise to meet these evolving needs?
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What are sustainable debt instruments?

The sustainable debt market is made up of a variety of fixed-income instruments raising funds to finance projects that advance economic, environmental and social objectives. Green bonds are currently the most commonly issued sustainable debt instrument, however recent years have seen a rise in social, sustainable and sustainability-linked bonds.

Who are the key players in this market?

Diagram showing key players in sustainable debt market.

What types of external reviews, including assurance engagements, exist?

There are two main types of external reviews that issuers can obtain related to their sustainable debt issuances:

  1. Second-party opinion (SPO)

  2. An SPO entails a review of the issuer’s bond framework such as the following:
    • Is the organization's bond framework aligned to the accepted market standard (i.e. ICMA's Green Bond Principles)?
    • Are the proceeds of the bond aligned to market practices and expectations of the investment community?
    • Are the key performance indicators adequate?
    SPO engagements are typically performed by consultants at sustainability service providers (e.g., Sustainalytics). Currently, no assurance is obtained however, market expectations for assurance at the pre-issuance phase may evolve in the future.

  3. Third-party assurance

  4. In a third-party assurance engagement, the practitioner designs and performs procedures to obtain sufficient appropriate evidence to express a conclusion or opinion about the subject matter information. Example assurance engagements include, assurance over:
    • allocation of funds for green and/or social projects;
    • expected impacts of the sustainable debt instrument reported by the issuer on an annual basis;
    • and performance against targets and key performance indicators.
    These engagements are usually performed by professional accountants in public practice, but they may be performed by others, including sustainability service providers. Professional accountants perform these engagements in accordance with recognized auditing and assurance standards, i.e., International Standard on Assurance Engagements (ISAE) 3000 (Revised). Reasonable or limited levels of assurance can be obtained.

What are some of the challenges and opportunities for assurance providers?

Numerous challenges in the sustainable debt market, including a lack of clear definitions of what constitutes sustainable activities as well as issues related to data management, result in challenges for third-party assurance providers. One of the most notable challenges for practitioners is when there is a lack of suitable criteria, which is a prerequisite to acceptance of an assurance engagement.

There exists an opportunity for the assurance profession to play a role in increasing stakeholder confidence in the sustainable debt market. Independent third-party assurance is critical to minimizing the risk of greenwashing and enhancing investor protection.

Want to learn more?

Check out our full research report.

Looking for other resources on sustainability reporting and assurance?

Review our comprehensive suite of resources to learn more about sustainability and related developments:

Are you a financial statement auditor?

Climate change is an area of increasing concern and priority for investors which may affect how investors perceive climate-related risks in an entity’s financial statements. Check out The consideration of climate-related risks in an audit of financial statements: Audit and assurance alert to assist in understanding considerations of climate-related risks in an audit of financial statements.

Keep the conversation going

Do you have additional questions on how to support your clients’ current and future sustainability needs? What are your views regarding the CPA profession’s role in sustainability assurance? Please email us directly.


The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.