The XRB consulted on an exposure draft of a temporary standard for assurance over greenhouse gas (GHG) emissions disclosures in climate reporting entities’ climate statements. There is a critical role for independent external assurance to enhance the credibility of these GHG emissions disclosures, which have an important role in decisions about the allocation of capital to achieve a just transition to a more sustainable and low-emissions economy.

The ED proposes allowing a choice of the following two standards to conduct the assurance engagement:

• ISAE (NZ) 3410 Assurance Engagements on Greenhouse Gas Statements (ISAE (NZ) 3410) issued by the External reporting Board (XRB), or
• ISO 14064-3:2019 Greenhouse gases—Part 3: Specification with guidance for the verification and validation of greenhouse gas statements (ISO 14064-3) issued by the International Organisation for Standardisation (ISO).

The requirements and other material that are part of ISO 14064-3 has not been included as part of the consultation. As a result, it is difficult for us, or other key stakeholders, to form a view on the appropriateness of the ISO framework and the equivalence of the two standards proposed as options in the ED. We are concerned that having a choice of two different standards would result in a two-tier approach to assurance over GHG emissions disclosures.

Investors expect to be able to attain a level of confidence and robustness in the assurance of sustainability reporting comparable to that which they attain in the audits of financial statements. Achieving this expectation demands a comparable level of robustness in governance and oversight arrangements for assurance over sustainability reporting, including the governance and oversight of the related standard setting, as there is for financial statement audits. The cornerstones of such robust arrangements include consistent, comprehensive independence standards and ethical and quality management requirements being established in standards that are set according to a rigorous due process focused on the public interest. 

In our view, the proposed requirements in the ED do not provide a comparable level of robustness that is present in the existing International Auditing and Assurance Standards Board (IAASB) assurance framework and standard setting process. To ensure that user needs are met, we recommend that there should be one assurance standard in New Zealand for the assurance of GHG emissions disclosures, and that should be ISAE (NZ) 3410.