Brazil Scraps World-First Rule Forcing Firms to Report Climate Risk

BRAZIL · FINANCE

Brazil was the first country in the world to write the new global sustainability-reporting standards into binding regulation. Less than three years later, its market regulator has reversed course, handing companies the choice of whether to report at all.

What changed in the ESG reporting rule

On May 29 the Securities and Exchange Commission of Brazil, the regulator known locally as the CVM, issued Resolution 244, which rewrites Resolution 193 from 2023. The original rule set Brazil on a path to require listed companies to prepare and publish sustainability- and climate-related financial reports for fiscal years starting on or after January 1, 2026, once a voluntary phase-in period ended.

Resolution 244 removes that future obligation. In its place, the regulator adopts a “comply or explain” framework, set to begin in January 2027, under which a listed company that chooses not to publish a sustainability report must issue a formal market notice explaining the decision. The reports become a choice rather than a command.

From global first-mover to voluntary regime

Resolution 193 had made Brazil the first country to embed the standards of the International Sustainability Standards Board, the global body that sets sustainability-disclosure rules, directly into national regulation. The framework was a centerpiece of Brazil’s push to position itself at the front of the global move toward standardized environmental, social and governance disclosure.

The regulator framed the reversal as a matter of flexibility, arguing that companies should be free to weigh the costs and benefits of how they use investors’ resources. It also kept one guardrail in place: firms that do choose to publish must still follow the ISSB standards and those of Brazil’s own sustainability-pronouncements committee, so the figures that are disclosed remain comparable.

Out of step with the global trend

The timing cuts against the international current. Over the past year and a half, jurisdictions including Japan, the United Kingdom, Canada, Singapore, Mexico, Australia, Chile and South Korea have advanced formal adoption of the same ISSB climate and sustainability standards, and the European Union already operates its own corporate sustainability-reporting regime. Brazil’s pivot toward voluntary disclosure runs the other way.

For large multinationals listed in Brazil, the practical effect may be muted: foreign institutional investors increasingly expect ISSB-aligned data, and companies exposed to global capital markets or to European supply chains may keep reporting regardless. The bigger uncertainty falls on smaller listed firms, for whom the mandate is now lifted.

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Why it matters for investors

Mandatory, standardized reporting was meant to give investors a single, accounting-style view of climate and sustainability risks across the market. A voluntary regime reintroduces variation: some companies will disclose in full, others will opt out with a brief justification, and comparing them becomes harder.

Supporters of the change argue it spares smaller issuers a costly compliance burden and lets each firm judge what its investors actually need. Critics counter that retreating from a mandate Brazil pioneered weakens transparency at the moment global peers are tightening their own rules. Which reading prevails will depend on how many companies keep reporting once they no longer have to.

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