The Role of the External Auditor in Managing Environmental, Social, and Governance Reputation Risk

Companies are under increasing pressure to manage their reputations on environmental, social, and governance (ESG) issues. Some companies have lost revenue, gone bankrupt, been boycotted by customers, or otherwise suffered a decline in value because of a negative reputation on ESG. We refer to the risk of this decline in value as ESG risk. Managing ESG risk, adequately informing investors of ESG risk, and increasing financial support for sustainable activities are primary concerns of public companies and their regulators. The U.S. Securities and Exchange Commission (SEC) and the European Commission recently issued public statements and taken actions toward achieving these … Read more