Augmenting Assurance: Minerva Stresses ARGA Must Avoid International Fragmentation
September 19, 2025
By Jack Grogan-Fenn and Rina Cindrak
Minerva Analytics has stressed that international alignment of the UK’s Audit, Reporting and Governance Authority (ARGA) must be a key priority to avoid the fragmentation of requirements in its response to a government consultation.
The consultation sought views on the government’s proposal to create greater regulatory oversight of third-party assurance services for sustainability-related financial disclosures. This would be achieved by giving ARGA the responsibility of creating a voluntary registration regime for entities that offer third-party assurance services for sustainability-related disclosures, which aims to drive trust in the UK sustainability assurance market and support companies to easily identify appropriately qualified sustainability assurance providers.
Minerva is generally supportive of ARGA, although its response highlighted that there are some risks to navigate and gaps and shortfalls that could benefit from being consulted on in the future.
There are several advantages that ARGA could potentially offer, as noted by Minerva, including boosting regulatory clarity and reducing confusion, increasing investor confidence and avoiding regulatory fragmentation with other jurisdictions.
“We support the UK government’s initiative to create and introduce an oversight regime for sustainability assurance that is profession-agnostic, fosters competition, and strengthens trust in sustainability disclosures,” Minerva’s consultation response read. “A well-designed framework has the potential to enhance the reliability of disclosures and ensure that the UK remains at the forefront of sustainable finance and corporate reporting.
“We therefore encourage ARGA to adopt a proportionate, profession-agnostic, and internationally aligned approach that recognises the contributions of both audit and non-audit providers, ensuring the regime builds capacity across the market to support market access, and support interoperability with global standards,” added Minerva.
ARGA is being introduced with the aim to replace the UK Financial Reporting Council (FRC), but the project has suffered several delays. It has now been seven years since the Kingman report recommended that the council be replaced “as soon as possible with a new independent regulator with clear statutory powers and objectives”. Kingman’s review highlighted deep structural flaws in the regulation of the audit industry, touching on weaknesses in the FRC’s funding model and an incomplete set of regulatory tools, these draw-backs were acknowledged by the CEO of the FRC stating that it led the FRC to act as “sheriff for only half of the country”.
ARGA is intended to be bestowed with a set of new regulatory powers, with these reforms aiming to improve the audit regime and corporate transparency. The set of new regulatory powers will provide ARGA a wider remit, extended by a Public Interest Entity status for the largest public companies, introducing a regime that will oversee the audit market and aim to address conflict of interest concerns at audit firms and build resilience.
ARGA will have the power to investigate and sanction company directors for serious failures in relation to their financial reporting and audit responsibilities. The FRC lacks the ability to investigate, take enforcement action or sanction individuals who are not members of accountancy professional bodies or members of the Institute and Faculty of Actuaries.
In contrast ARGA will have such powers, as well as the ability to direct changes to company reports and accounts without having to go to court. This could make reporting more effective, instilling a greater sense of urgency and removing bureaucratic processes that can delay higher quality, accurate reporting.
These amendments have been introduced in response the FRC’s 2024 market study which outlined concerns about a fragmented market for sustainability assurance, a lack of quality and transparency across assurance providers, some concerns also raised the risk of the dominance of the Big Four audit firms in the market.
The consultation was one of three launched by the UK government in June, as reported by Minerva Analytics, with the trio closing on September 17. The government is now analysing feedback from the consultation responses, although an exact timeline for next steps is yet to be confirmed.
The consultation sought feedback on the development of a voluntary registration regime for the providers of assurance of sustainability reporting, with gleaning opinions on a proposal for the long-mooted ARGA its central aim. The authority would be given the responsibility of creating a voluntary registration regime for entities that offer third-party assurance services for sustainability-related disclosures.
Minerva’s response recognised that non-audit sustainability specialists and experts provide critical experience and insight to sustainability-related financial disclosure assurance. This ties into the profession-agnostic proposal of the framework, which is supported by Minerva.
Minerva backs this element of the proposal as limiting assurance to audit firms risks over-concentration on conventional audit backgrounds and excluding sustainability specialists. These specialists can have deep knowledge in important areas including biodiversity accounting, greenhouse gas emissions and intensities and green finance and accounting among many others. Expertise in understanding of frameworks such as EU Taxonomy and/or Green Bond Principles, as many sustainability specialists possess, is crucial to conducing quality and accurate sustainable finance disclosure assurance.
Minerva is also supportive of the opt-in approach suggested in the consultation proposal as it encourages participation, allows firms and sole practitioners to innovate and adapt to the assurance requirements that will be set (once these are outlined in a later consultation), reduces immediate burdens allowing it to phase in, as and when providers are prepared.
However, Minerva’s response flagged that there is the potential risk of creating a two-tier market of registered and non-registered providers, which could cause confusion and inconsistency. Minerva noted that despite this being something that was mentioned as a concern in their previous market study, steps do not appear to have been taken to effectively address this issue.
However, despite there being a two-tier market risk, Minerva is supportive of the voluntary registration regime, as it is a proportionate starting point. The response also considered that the market is still maturing, and that there is a lack of consistency in quality again, as mentioned in market study. Thus, a phased approach is needed to help to develop that capacity and meet standards before mandating assurance.
Minerva agreed that both Individuals and firms should be eligible, allows for flexibility, inclusion of smaller/specialist firms and practitioners. Caveat: include accountability safeguards, like, competence, ethical standards, transparency and liability.
The consultation mentions the UK Sustainability Reporting Standards (SRS) and Minerva thinks that assurance should apply across the SRS. This could help prevent fragmentation and duplication with reporting requirements including the Task Force on Climate-related Financial Disclosures, European Sustainability Reporting Standards, the International Organization for Standardization and the Global Reporting Initiative, as well as avoiding associated extra costs.
Minerva has suggested that ARGA should act to convene UK sustainability standards and align them with global developments, having an adaptive, advisory and improvement-focused approach.
“ARGA should balance quality and independence requirements with proportionality and market access, ensuring the regime builds investor confidence without unnecessary barriers to entry”, Minerva’s consultation response added. “Clear communication and guidelines, as well as robust ethical and independence safeguards should be incorporated as this would be essential to the success of the regime in being both practical and effective.”
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Last Updated: 19 September 2025