Do carbon assurance providers play a strategic role in moderating the relationship between carbon emissions and firms’ cost of equity?

This study investigates the impact of a firm’s total carbon emissions on its
implied cost of equity capital (COE) and explores whether this relationship is
moderated by the choice of carbon assurance provider. Our findings show
that firms aligning with the shared societal objective of minimizing total
carbon emissions can lower their COE, consequently increasing their overall
value. This association is enhanced when a firm’s carbon emissions are
assured by a professional accountant instead of a specialist consultant. This
highlights the potential for green firms to maximize their value through the
strategic involvement of a professional accountant. By doing so, these firms
can proficiently convey and authenticate their corporate sustainability
achievements to investors and other stakeholders. Our findings underscore
the importance for a firm to carefully consider the reputation and
independence of the assurance provider when seeking carbon assurance.