According to the CVM, the public consultation is designed to gather comprehensive evidence concerning the practical costs, operational benefits, and systemic drawbacks of different regulatory structures. Among the primary areas of focus, the regulator is asking stakeholders to weigh in on alternative pathways, such as phasing in mandatory obligations progressively over a multi-year timeline, or selectively making only climate-related disclosures mandatory while leaving other broader sustainability metrics subject to flexible guidelines. This broad outreach aims to address mounting concerns from the investment and corporate communities regarding transparency, data reliability, and regulatory consistency in Brazil’s financial markets.
The roots of Brazil’s current sustainability reporting saga date back to 2023, when the CVM initially unveiled a landmark regulatory framework requiring public companies to provide annual sustainability and climate-related disclosures aligned with international baselines. Under that original roadmap, mandatory compliance was slated to begin for fiscal years starting on or after January 1, 2026. Following that initial push, the regulator formally approved specialized sustainability reporting standards formulated by the Brazilian Sustainability Pronouncements Committee, or CBPS. These domestic standards were closely modeled on the foundational general sustainability and climate reporting standards released by the IFRS Foundation’s International Sustainability Standards Board, famously known as IFRS S1 and IFRS S2.
However, the trajectory of Brazil’s ESG regulatory landscape shifted dramatically in May 2026. At that time, the CVM surprised many market observers by amending its regulation to dismantle the strictly mandatory framework. In its place, the regulator established a "comply-or-explain" system. Under this revised voluntary model, public companies that elected not to file a comprehensive sustainability report were no longer penalized outright; instead, they were merely required to justify their decision through an official market announcement detailing their reasoning. For those firms that did choose to proceed with sustainability reporting, the rules mandated strict adherence to the rigorous standards established by the CBPS and the ISSB. Furthermore, the amended regulation stipulated that companies opting into reporting had to commit to the practice for a minimum of three consecutive years. Additionally, if a reporting company subsequently decided to stop issuing sustainability disclosures, it was required by law to publicize that decision through a market announcement one full fiscal year before halting publication.
This sudden shift toward a voluntary reporting system triggered immediate and widespread pushback from a broad coalition of investing institutions, accounting bodies, and corporate governance organizations. Critics argued passionately that a voluntary framework would severely undermine market comparability, weaken Brazil’s hard-won alignment with global international reporting standards, and ultimately reduce transparency for domestic and foreign investors alike. These stakeholders pointed out that inconsistent reporting practices would make it exceedingly difficult for capital allocators to accurately price environmental and social risks across Brazilian equities, potentially raising capital costs for the very companies the regulations were designed to assist.
In light of this heavy criticism and the ongoing evolution of global reporting norms, the CVM has recognized the urgent need to re-examine its regulatory approach. The newly launched public consultation is specifically intended to collect rigorous empirical evidence that can either corroborate or refute several critical economic and regulatory hypotheses. Among the propositions being evaluated is the core hypothesis that voluntary reporting regimes inherently fail to produce sufficient, credible, and comparable information for market participants. The consultation is also examining whether the reduction in the cost of capital generated by mandatory disclosure regimes might actually outweigh the incremental compliance costs incurred by businesses.
Another crucial hypothesis under review involves the disproportionate burden that compliance places on smaller enterprises. The CVM is exploring whether smaller public companies are exposed to significantly higher relative compliance costs compared to their larger, better-resourced corporate counterparts. Additionally, the regulator is investigating whether the specific structural requirements embedded in the revised May 2026 regulation—such as the mandatory three-year commitment for participating firms—may have inadvertently discouraged voluntary participation by making the barrier to entry too rigid. Finally, the consultation acknowledges concerns that successive, rapid regulatory changes over a short timeframe may have resulted in unrecoverable compliance investments for businesses while eroding the long-term predictability of Brazil’s regulatory framework.
To address these complex challenges, the CVM’s consultation document presents several distinct regulatory alternatives for public feedback. Stakeholders have been invited to comment on whether the regulator should simply maintain the current "comply-or-explain" regime while perhaps adjusting the specific conditions governing voluntary participation. Alternatively, respondents can evaluate various structured models for reinstating mandatory compliance. These models include phasing in mandatory obligations progressively based on company size, establishing a definitive future calendar date for a permanent transition to mandatory reporting, or carving out a middle ground where only climate-related reporting is made mandatory while leaving more complex metrics, such as Scope 3 greenhouse gas emissions, on a voluntary "comply-or-explain" basis. The consultation also invites feedback on whether mandatory reporting requirements should eventually be expanded beyond public companies to encompass a wider swath of the Brazilian corporate ecosystem.
The public consultation period is currently underway and will remain open to receive submissions through February 28, 2027. During this multi-month window, the CVM is encouraging all interested parties—including listed companies, institutional investors, audit firms, industry associations, and civil society organizations—to contribute detailed feedback, data, and analytical insights. The outcomes of this consultation are expected to heavily influence the next chapter of Brazil’s sustainability reporting policy, determining whether the nation will return to a strict mandatory regime aligned with global ISSB standards or retain a more flexible, voluntary approach for its capital markets.
