From Financial to ESG Assurance: The Determinants and Consequences of ESG Hiring by Accounting Firms

The growing demand for ESG (Environmental, Social, and Governance) assurance has precipitated emerging market requirements, compelling accounting firms to adapt their capabilities and service offerings. While prior research has predominantly focused on the demand-side factors that influence firms' decisions to obtain ESG assurance, evidence on the supply-side is scarce, and there is a significant gap in understanding how accounting firms—the dominant player in the financial assurance market—build ESG assurance capabilities, particularly through strategic human capital investments. This study addresses this gap by examining whether accounting firms proactively or reactively engage in the acquisition of ESG talent, the extent to which ESG hiring acts as a barrier to expanding ESG assurance services, and how ESG hiring impacts firms' market share and service quality in the ESG assurance space. Using a combination of hand-collected ESG assurance data and labor market data from sources such as LinkUp and Burning Glass Technologies, this research employs regression analyses to test hypotheses related to accounting firms' ESG hiring patterns, time-to-fill, and their implications for market share and client ESG outcomes. The findings aim to contribute to the literature on ESG assurance, human capital investment, and corporate sustainability by providing empirical evidence on the role of human capital in markets of specialized assurance services such as ESG. Additionally, the study offers insights for policymakers and standard­setters regarding the preparedness of accounting firms for future ESG assurance mandates. By linking human resource investments to assurance effectiveness, this research underscores the critical role of talent acquisition in shaping the ESG assurance landscape.