Assurance and ESG rating divergence can limit the informational value of sustainability disclosure mandates

Abstract Regulators increasingly treat disclosure quantity as the principal policy lever, assuming that more sustainability disclosure yields better-informed investors and more efficient capital allocation. This conceptual paper argues that the assumption is misspecified. Disclosure moves investor beliefs only insofar as it is credible, and credibility is manufactured downstream of the reporting entity, by assurance providers who verify and rating agencies who aggregate. We develop the construct of the credibility wedge, the gap between the quantity of sustainability information a firm discloses and the reliability investors attach to it. Drawing on costly state verification, cheap-talk and signalling models, ambiguity-based asset pricing and institutional theory, we specify a three-layer architecture of preparer, assurer and rater, each with a distinct failure mode. Twelve propositions connect regime design to the wedge, and the wedge to belief revision, the cost of capital and capital allocation. A two-by-two typology is derived and applied to the four architectures observable in 2026: the narrowed European regime, jurisdictions adopting IFRS S1 and S2, the United States, and India’s BRSR Core. As the wedge grows, the marginal informational return to additional disclosure tends to zero, implying that verification and rating infrastructure must be built before disclosure scope is widened. India offers an unusually favourable research setting, and eight estimable models are specified. For the 2030 Agenda, target 12.6 and its report-counting indicator track disclosure volume rather than decision-useful information, making credible verification a precondition for reporting to advance SDGs 12 and 13.