2/15/2024
Considering the agendas for ecological transformation established by the Ministry of Finance and for sustainable finance established by the Brazilian Securities and Exchange Commission (CVM), on October 20, 2023 CVM Resolution # 193 was published, regulating the preparation and disclosure or financial information reports related to sustainability based on the international standard issued by the International Sustainability Standards Board (ISSB) (IFRS S1 and IFRS S2). The Resolution, issued by the CVM in a leading regulatory position, applies to publicly traded companies, investment funds and securitization companies as of fiscal years beginning on or after January 1, 2024.
The Resolution was drawn up based on the recommendation of the International Organization of Securities Commissions (IOSCO) to adopt the sustainability disclosure standards issued by the ISSB in local jurisdictions, providing investors and the global financial markets with a framework of important information for assessing risk and opportunities related to sustainability.
In the Resolution CVM adopted some key principles, such as: (i) increasing the transparency, reliability, consistency and comparability of financial information; (ii) establishing measures to provide transparency on the risk and opportunities related to sustainability that affect entities in the capital market, in order to contribute to the development of a sustainable and regenerative economy; and (iii) establishing measures to disclose the policies and procedures adopted by entities to address and mitigate the impacts of climate change, social and environmental risk.
Adoption of the ISSB standard is voluntary as of the fiscal year beginning January 1, 2024. Interested publicly traded companies must declare this option by means of a notice to the market, indicating the fiscal year in which they will start using the standards (preferably by May 31, 2024, limiting this option or its revision to December 31, 2024). Investment funds and securitization companies, on the other hand, must declare their option, or review, by the end of the fiscal year prior to the first preparation and disclosure of the financial information report related to sustainability, also by means of a notice to the market.
The ISSB standard will become mandatory for publicly traded companies from the fiscal year beginning on or after January 1, 2026. However, the Resolution already provides for the possibility of adjustments (including with regard to the mandatory deadline) following Public Consultation on the subject, at which time information will be gathered on the impact, challenges and benefits of adopting the new standards.
The Resolution determines that:
(a) the frequency of disclosure of the financial information report related to sustainability must be at least equal to the financial statements at the end of the fiscal year;
(b) the report must be identified and presented separately from the company’s other information and filed in the electronic system available on the CVM’s website; and
(c) the reports must be assured by independent auditors registered with the CVM, in accordance with the rules issued by the Federal Accounting Council. Until the end of the 2025 fiscal year, the assurance will be limited; from the fiscal year beginning on or after January 1, 2026, the assurance will be reasonable.
The Corporate Law team at L.O. Baptista Advogados is available to provide any information and guidance on the matter.
Coauthors: Renata Castro Veloso e Marcos Yuuki Matheus Okamoto
