According to a recent announcement from the Brazilian Securities and Exchange Commission (CVM) and the Ministry of Finance, publicly traded companies in Brazil will be required to make annual sustainability and climate-related disclosures starting from 2026.
According to CVM, the new reporting requirements will be based on the sustainability and climate disclosure standards recently released by the International Sustainability Standards Board (ISSB), an arm of the IFRS Foundation. The ISSB officially announced these new global sustainability and climate disclosure standards in London on June 26, 2023, with the aim of forming the foundation for sustainability reporting and expected to come into effect in 2024.
The new standards will start to be applied for annual reporting periods from January 2024, and companies will begin making disclosures based on the new standards from 2025.
The ISSB began work at the COP26 climate conference in November 2021 to develop IFRS Sustainability Disclosure Standards to meet companies’ expectations regarding sustainability risks and opportunities, ensuring the consistent understanding of impact from investors, companies, governments, and regulators.
Regulators in major jurisdictions around the world, including Europe, the United Kingdom, and the United States, have introduced or are in the preparatory stages of introducing mandatory sustainability reporting requirements for companies. It is evident that a significant portion of companies will be significantly impacted by the ISSB standards.
The two new standards include “IFRS S1 General Requirements for Disclosure of Sustainability-Related Financial Information” and “IFRS S2 Climate-Related Disclosures.” When developing both IFRS S1 and IFRS S2, they took into account recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) and feedback from over a thousand consultation responses.
The International Organization of Securities Commissions (IOSCO) announced official approval of the new IFRS S1-S2 sustainability and climate-related disclosure standards on July 25, 2023.
IOSCO is an organization of securities and futures regulators from around the world. Its members typically include the primary securities and/or futures regulators of a jurisdiction or the main financial regulator of each country. With its approval, IOSCO has called for the inclusion of the new standards into regulatory frameworks across over 130 member jurisdictions, which together regulate more than 95% of the world’s financial markets.
Following IOSCO’s call for regulators to include the standards in their own sustainability reporting regulatory frameworks, Brazil, the United Kingdom, and Australia, among others, have announced their adoption of the new standards as the latest in a series of jurisdictions.
The new reporting requirements for Brazil are part of the Ecological Transformation Plan initiated earlier this year, aimed at promoting the transition to a green economy, including planned public and private infrastructure investments totaling $350 billion.
According to CVM, publicly traded companies and investment funds can voluntarily start sustainability reporting in accordance with IFRS standards in 2024, with mandatory reporting for public companies beginning in 2026. Starting from 2027, sustainability reporting will be mandatory within three months after the end of the fiscal year or concurrent with the disclosure of financial statements.
CVM has stated that the new reporting requirements will assist in evaluating risks and opportunities for global investors, reducing information costs, optimizing capital allocation, and enabling decisions that are in line with sustainable and responsible values.”