Brazil CVM opens consultation on mandatory vs voluntary ESG reporting

Brazil's securities regulator has opened a public consultation on whether sustainability and climate disclosure by listed companies should be mandatory or voluntary, and on alternative structures for the regime. The CVM's review lands months after it amended the regulation that had made ISSB-aligned reporting mandatory, moving instead to a comply-or-explain system, ESG Today reported on Nov. 2.

In 2023 the CVM set mandatory ISSB-aligned disclosure for public companies, beginning with fiscal years starting on or after Jan. 1, 2026. The standards came from the Brazilian Sustainability Pronouncements Committee and were built on the ISSB's IFRS S1 for general sustainability reporting and IFRS S2 for climate. The May 2026 amendment turned that into comply-or-explain: a company that chooses not to file must justify the decision in a market announcement, including its reasons. A company that files must follow the CBPS and ISSB standards and keep reporting for at least three consecutive years; if it later stops, it must disclose that decision in a market announcement in the fiscal year before it stops.

For a fund selector or allocator with Brazilian equity or local-currency credit exposure, the reporting population is now self-selecting. An issuer that files has committed to CBPS and ISSB standards for at least three consecutive fiscal years, and one that opts out must put its reasons in a market announcement. That announcement is the document to read before a gap in a portfolio company's sustainability data is treated as an oversight rather than a decision. Restoring a single baseline would change what cross-issuer screens can assume about Brazilian holdings.

The shift to voluntary reporting drew criticism from a broad range of investing, accounting and governance organizations. Those groups argued that voluntary disclosure could undermine comparability, weaken alignment with international standards and reduce transparency for investors. The CVM said the consultation would gather more comprehensive evidence on the costs and benefits of different regulatory approaches, including mandatory and voluntary reporting. It is also seeking views on alternatives such as phasing in mandatory obligations over time or making only climate reporting mandatory.

Issuers preparing reports for fiscal years beginning on or after Jan. 1, 2026, work under the comply-or-explain rule while the regulator collects that evidence. An issuer that starts filing is bound to at least three consecutive years of CBPS- and ISSB-aligned reports; one that does not must say so publicly, with reasons.