This study presents an analysis of the relationship between sustainable institutional investors and environmental decoupling. Moreover, we recognize the moderator effect of carbon assurance (quality) on this link. Based on stakeholder agency theory, we use a sample of listed firms headquartered in the European Union with CDP participation (912 firm-year observations) from the business years 2017-21 and conduct correlation and regression analyses. In line with our theoretical framework, we find that the ratio of sustainable institutional investors with a signature on the UN Principles for Responsible Investment is negatively associated with environmental decoupling. We also note that carbon assurance quality, based on the selection of an audit firm as assuror, reasonable assurance level, and high-quality assurance standards (ISAE3000) strengthen this association. Our results are robust to various alternative specifications, endogeneity checks, and offer major research and managerial implications. Our study mainly contributes to the growing literature on sustainable corporate governance and CSR decoupling. Future research should analyze other environmental or social decoupling attributes and the impact of sustainable corporate governance on these dimensions.