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In a significant move towards promoting sustainability and transparency, Brazil’s Securities and Exchange Commission (CVM) and Ministry of Finance have jointly announced public companies in Brazil to require mandatory sustainability reporting from 2026. This development aligns Brazil with the global drive for responsible corporate reporting on sustainability and climate impacts.
The CVM has confirmed that the forthcoming reporting obligations will be built upon the recently issued sustainability and climate-related disclosure standards by the IFRS Foundation’s International Sustainability Standards Board (ISSB). The ISSB debuted in November 2021 at the COP26 climate conference and has been working diligently to formulate IFRS Sustainability Disclosure Standards. These standards have gained tremendous traction, driven by mounting calls from investors, corporations, governments, and regulatory bodies to establish a universal benchmark for sustainability reporting, ensuring a consistent comprehension of the implications of sustainability risks and opportunities on corporate viability.
Brazil’s requirement for mandatory sustainability reporting from 2026 is not an isolated initiative. Brazil joins the ranks of several other jurisdictions that have pledged their commitment to implementing these cutting-edge standards, following in the footsteps of countries like the UK and Australia. In a prior proclamation, the International Organization of Securities Commissions (IOSCO), a prominent international policy forum and setter of standards for securities regulators, urged regulators worldwide to incorporate these standards into their sustainability reporting regulatory frameworks.
Emmanuel Faber, Chair of the ISSB, welcomed the CVM’s announcement and stated, “We continue to hear strong support for the ISSB’s Standards from regulators globally, and I commend the Brazilian Ministry of Finance and Comissão de Valores Mobiliários for providing clarity to companies and investors in Brazil by setting out a clear roadmap towards mandatory adoption.”
The introduction of mandatory sustainability reporting is an integral component of Brazil’s Ecological Transformation Plan, a comprehensive strategy launched earlier this year. The primary objective of this plan is to facilitate the transition towards a greener economy bolstered by an impressive $350 billion earmarked for public and private infrastructure investments.
According to the CVM’s stipulations, public companies and investment funds can voluntarily commence sustainability reporting per the IFRS standards as early as 2024. However, now Brazil requires mandatory sustainability reporting from 2026. Notably, starting in 2027, sustainability reporting will be mandated within three months following the fiscal year’s conclusion or in tandem with the release of financial statements, depending on whichever occurs first.
The CVM has emphasized that these novel reporting requirements will not only serve the interests of local stakeholders but will also enhance Brazil’s appeal to global investors. These requirements are anticipated to trim information costs and optimize capital allocation by providing a standardized framework for assessing sustainability risks and opportunities. Furthermore, they will empower decisions that resonate with sustainable and responsible principles.
In conclusion, the mandatory sustainability reporting measures set to take effect in Brazil to require mandatory sustainability reporting from 2026 mark a significant stride towards reinforcing the country’s commitment to environmental and corporate responsibility. By embracing the global standards championed by the ISSB, Brazil positions itself as a key player in the movement towards a more sustainable and transparent corporate landscape. This initiative will benefit local stakeholders and resonate with international investors seeking clarity and consistency in assessing sustainability factors.
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