Brazil's CVM Reverses Mandatory Sustainability Reporting Rule for Public Companies

Brazil's securities regulator pulled back from one of its most ambitious environmental accountability measures on Friday, reversing a rule that would have required publicly traded companies to disclose detailed climate and sustainability data starting in 2027. The move came swiftly after sustained pressure from the business community, which argued that the compliance burden would be prohibitively expensive and poorly timed given other recent regulatory changes.

The original mandate, established through resolution 193/2023, would have forced companies to publish reports containing specific information about assets vulnerable to environmental damage and greenhouse gas emission targets. These documents would have required firms to quantify what portion of their holdings faced climate risk, explain how energy transitions or water scarcity might affect their operations, and describe whether they planned to shift their business model or capital allocation in response to climate change. A sanitation company, for instance, would have had to detail how declining water availability threatened its infrastructure. The rule represented an active effort to combat greenwashing—the practice of companies exaggerating or fabricating their environmental commitments.

The business lobby, led by Abrasca, the Brazilian association of publicly traded companies, had made its case clear. In a formal petition submitted late last year, the group requested either that the rule be scrapped entirely or delayed by three years. The central argument: implementation would impose costs reaching as high as 70 percent of what companies already spend on auditing, straining balance sheets already stretched by the recent tax reform and other regulatory shifts. The CVM, responding to this pressure, reversed course.

In its official statement, the regulator framed the reversal as a refinement rather than a retreat. The new approach, it said, preserves transparency and comparability while respecting companies' freedom to weigh the costs and benefits of how they deploy investor capital. Sustainability reporting now returns to voluntary status. However, any company that chooses to disclose this information must follow international standards set by the ISSB—the International Sustainability Standards Board—as translated into Portuguese by the Brazilian equivalent committee. This requirement, the CVM argued, maintains reliability and allows investors to compare disclosures across firms.

The revised rules also introduced flexibility. Companies that decide the international accounting standard doesn't fit their business can opt out, provided they publicly announce their choice and explain their reasoning—a practice known as "comply or explain." The regulator also eliminated a previous requirement that once a company began voluntary reporting, it had to continue indefinitely. That rule, the CVM noted, actually discouraged companies from experimenting with disclosure. Now, firms must report for at least three consecutive years before they can stop, and they must notify the market in advance if they plan to discontinue.

For sustainability advocates and market observers, the reversal represents a significant setback. The original mandate was seen as a serious tool against corporate greenwashing, forcing companies to confront the real financial implications of climate risk rather than simply issuing aspirational statements. The detailed requirements would have made it difficult for firms to hide exposure to environmental threats or to claim commitment to sustainability without backing it up with concrete operational changes.

Abrasca, for its part, celebrated the decision. The group's statement acknowledged that ESG—environmental, social, and governance factors—matter for long-term value creation and risk management, but insisted that regulatory requirements must respect proportionality, materiality, and economic efficiency. The association's chief executive, Cátilo Cândido, argued that corporate commitment to sustainability should flow from genuine business conviction rather than regulatory mandate, suggesting that responsible practices are increasingly understood as essential to value creation over time.

What remains unclear is whether voluntary disclosure, even when aligned with international standards, will prove sufficient to give investors the visibility they need to assess climate risk. The question now facing Brazil's capital markets is whether companies will choose transparency on their own, or whether the absence of a mandate will allow the very greenwashing the original rule was designed to prevent.