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Brazil: CVM approves the international standard on sustainability-related financial disclosures

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In brief

Following the release of the inaugural standards of the International Sustainability Standards Board (ISSB) — IFRS S1 and IFRS S2 — the Securities and Exchange Comission of Brazil (CVM) released the first delivery of what it calls the CVM’s Sustainable Finance Action Plan: CVM Resolution 193, which deals with the preparation and disclosure by publicly traded companies, securitization companies and investment funds of financial information reports related to sustainability.

In more detail

The CVM’s Sustainable Finance Action Plan, launched at the beginning of October, aims, among other things, to improve and draw up specific rules on sustainable finance, combat greenwashing and promote transparency in sustainable initiatives.

As a pioneer, the CVM issued Resolution 193, which deals with the preparation and disclosure of financial information reports related to sustainability, following the international standard issued by the International Sustainability Standards Board (ISSB).

In 2023, the ISSB issued two sustainability standards: (i) IFRS S1, which sets out the requirements for preparing and disclosing financial information related to sustainability, and (ii) IFRS S2, which establishes climate-related disclosures.

CVM Resolution 193 incorporates the international standards into the Brazilian legislative environment, and stipulates that publicly traded companies, securitization companies and investment funds will have the option of adopting, initially, the preparation and disclosure of financial information reports related to sustainability from the fiscal years beginning on or after 1 January 2024, along the lines of the ISSB standard.

Publicly traded companies will be required to prepare and disclose the report in accordance with ISSB standards as of fiscal years beginning on or after 1 January 2026.

This means that companies that choose to present the report voluntarily will be able to benefit from certain flexibilities established in the standards until the first fiscal year of mandatory adoption, as long as they explicitly and unreservedly declare their adherence.

The report must be presented separately from the company’s other information and must be prepared by an independent auditor, registered with the CVM, in accordance with the rules issued by the Federal Accounting Council.

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Trench Rossi Watanabe and Baker McKenzie have executed a strategic cooperation agreement for consulting on foreign law.

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Renata Campetti Amaral joined the firm in 2002 and became a partner in 2013. She is the head of the firm’s Climate Change, Environmental Law and Sustainability group in Brazil, and the leader of Ablfs McKfnzif’s global climate change group in Latin America. Is also the coordinator of the sustainability initiatives conducted by the office’s B-Green Committee. Renata assists the major players in the Brazilian market in Nature-bases Solution (NbS) projects, transaction of carbon credits, implementation of decarbonization strategies and carbon-related advocacy and regulatory matters. Renata leads several of the largest environmental and regularization cases in the country. She has extensive experience in sustainability matters, as well as in managing crises and negotiating with stakeholders. Advises on negotiating with authorities; judicial and administrative litigation; reviewing environmental aspects of institutions and financial operations; drafting environmental provisions in contracts and other commercial operations. Renata has extensive experience in dealing with environmental management, legal auditing and other organizational practices; regulatory and institutional analysis and environmental control; negotiation and implementation of environmental remediation plans; environmental licensing; legal aspects of biodiversity protection; environmental crisis management; development of preventive policies and strategies for companies; negotiation and drafting of contracts for the purchase and sale of carbon credits and acting in transactions related to various aspects of the energy transition.
*Trench Rossi Watanabe and Baker McKenzie have executed a strategic cooperation agreement for consulting on foreign law.

Author

Evaristo Lucena joined the Firm in 2020. He integrates the Transactional practice group, with focus on corporate, mergers and acquisitions, and capital markets. Specializing in corporate law and capital markets, Lucena often represents issuers, shareholders, financial institutions and investors in a variety of transactions involving structuring, registration and listing of companies with regulatory agencies and stock exchanges in Brazil and abroad, and M&As of publicly traded companies in non-regulated and regulated segments.
Trench Rossi Watanabe and Baker McKenzie have executed a strategic cooperation agreement for consulting on foreign law.

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