Sustainability Assurance Practice Diversity and Idiosyncratic Risk in Carbon‐Intensive Firms: A Textual Analysis Approach.

Abstract

[EN]Sustainability assurance practice remains highly fragmented, resulting in considerable variation in assurance outcomes. Using adataset of 1465 assurance reports (2018–2022), this study investigates the relationship between the level of assurance profession-alism reflected in assurance reports and idiosyncratic risk in carbon-intensive firms. Assurance professionalism is defined as thepresence in assurance reports of explicit evaluations of qualitative dimensions of sustainability disclosures, including balance,materiality, completeness, reliability and accuracy. Our findings reveal that firms with higher levels of assurance professional-ism exhibit lower idiosyncratic risk. In the context of carbon assurance, this effect depends on both the proportion of emissionsassured and the level of assurance obtained. Moreover, higher assurance professionalism enhances firms' resilience to risksarising from climate transition shocks. Finally, the effects of assurance professionalism are more pronounced in voluntary as-surance settings. This study contributes to ongoing debates on the heterogeneity of assurance practices and the role of assurancemechanisms in fostering accountability.