IFRS-inspired standards for corporate sustainability reports approved in Brazil

On October 29, 2024, Brazil’s Securities and Exchange Commission (CVM) published Resolutions No. 217, No. 218, and No. 219 to mandate the adoption of the Brazilian Committee for Sustainability Pronouncements’ (CBPS) Technical Pronouncements No. 1 and No. 2. These pronouncements are based on International Sustainability Standards Board’s (ISSB) IFRS S1 and S2 standards, and publicly held companies, investment funds, and securitization companies must comply with them when preparing and reporting sustainability-related financial information. The new rules have also led to specific amendments to CVM Resolution No. 193.

Brazil became the first country to formally adopt the ISSB reporting standards with the publication of CVM Resolution No. 193 in October 2023. At the time this resolution was issued, however, the CBPS had yet to translate the ISSB’s standards for preparing annual reports into Portuguese and to internalize and adapt them to align with Brazilian regulations.

Once the CBPS completed adapting IFRS S1 and S2 into CBPS Pronouncements No. 1 and No. 2, the CVM submitted these standards to public consultation under the terms of Decree No. 10,411/2022 to hear feedback from the market on mandating their adoption. The new standards were disclosed after the public consultation concluded and are detailed below.

Sustainability-related financial information

CVM Resolution No. 217 determines that all publicly held companies must comply with CBPS Technical Pronouncement No. 1 – General Requirements for Disclosing Sustainability-Related Financial Information (adapted from IFRS S1).

This resolution seeks to ensure investors are fully informed about sustainability-related risks and opportunities that may affect companies’ cashflows, access to finance, or capital costs in the short, medium, and long term.

Climate-related financial information

CVM Resolution No. 218 mandates compliance with CBPS Technical Pronouncement No. 2 – Climate-Related Disclosures (which adapts IFRS S2 to Brazilian regulations). This resolution outlines requirements for disclosing risk-related information (including physical and transition risks), as well as opportunities within the realm of climate change that may affect the companies’ operating revenue, capital costs, and access to capital.

The resolution also requires companies to disclose the characteristics of the procedures, internal controls, and corporate governance structures that were implemented to monitor and manage climate-related risks and opportunities.

CVM Resolutions No. 217 and 218 seek to encourage companies to implement governance practices and set sustainable goals that align with their long-term strategies.

New deadline for voluntary disclosure

CVM Resolution No. 219 has amended article 5 of CVM Resolution No. 193, setting a new deadline for companies that opt to disclose sustainability-related information prior to the mandatory reporting deadline (referring to the fiscal year starting in 2026), as provided for in article 1 of CVM Resolution No. 219.

With this initiative, the CVM aims to encourage companies to hasten their information disclosures, facilitating regulatory compliance and encouraging the gradual adoption of more sustainable and transparent practices.

Companies that opt for the early disclosure of their sustainability-related information should do so within nine days of the end of the fiscal year. Previously, CVM Resolution No. 193 provided that companies could make early disclosures up to the submission of their reference form.

Potential amendments to CVM Resolution No. 193

During SNC Public Consultations No. 2/2024 and No. 3/2024, a number of market players suggested restricting the applicability of the resolutions to specific groups of companies. For example, one suggested compliance with these resolutions should not be mandatory for category A-registered companies admitted to trading with no shares in circulation, and/or category B-registered issuers. Another suggestion was to implement the resolutions in stages – based on company size, category, or sector, prioritizing sectors subject to higher demand for information disclosure.

The CVM has stated that a specific analysis of the market in relation to the challenges associated with implementing the resolutions will be conducted by the beginning of 2025. This analysis is expected to be concluded by the end of the first half of 2025, after which the CVM will determine whether certain rules are not applicable to all publicly held companies, as well as the potential measures for adopting the resolutions in stages. However, especially given some companies have already opted to follow the rules for the 2024 fiscal year, the CVM deems a general postponement (applicable to all companies) to be unsuitable.

Irrespective of any further developments in 2025, CVM Resolutions No. 217, No. 218, and No. 219 reinforce Brazil’s commitment to more transparent and reliable ESG information reporting. These resolutions also mark another step forward in CVM’s strategic efforts to modernize Brazil’s capital markets in line with global trends, with new standards that integrate transparency, corporate governance, and sustainability.

For more information on this topic, please contact Mattos Filho’s Capital Markets and ESG practice areas.