Brazil reopens sustainability reporting debate for 2027

Brazil’s Securities and Exchange Commission (CVM) will keep a public consultation on sustainability and climate reporting open through February 28, 2027, reopening a regulatory choice it had appeared to settle.

CVM launched the consultation to assess the benefits and drawbacks of mandatory and voluntary disclosure for public companies. The move comes only months after the regulator amended a rule that had introduced mandatory annual disclosures aligned with International Sustainability Standards Board standards.

What changed in May 2026?

CVM first unveiled its sustainability reporting requirements in 2023, with annual mandatory disclosures due for fiscal years starting on or after January 1, 2026. The regulator subsequently approved sustainability standards published by the Brazilian Sustainability Pronouncements Committee, based on the IFRS Foundation’s International Sustainability Standards Board general sustainability standard IFRS S1 and climate standard IFRS S2.

In May 2026, CVM amended that regulation and shifted the scheduled mandate to a voluntary system built around “comply-or-explain.” A public company that does not file a sustainability report must publish a market announcement that explains its reasons.

Companies that choose to report must comply with the CBPS and ISSB standards, and the revised regulation requires them to prepare reports for at least three consecutive years. A company that later opts out must disclose that decision through a market announcement in the fiscal year before it stops reporting.

The paper trail remains even when the report does not. In short, Brazil traded a universal start date for company-by-company explanations.

Why did the reversal draw criticism?

A broad range of investing, accounting and governance organizations criticized the voluntary shift. They argued that voluntary reporting could undermine comparability, weaken alignment with international standards and reduce transparency for investors.

CVM responded by seeking more comprehensive evidence on the costs and benefits of mandatory and voluntary approaches. The consultation now tests whether the lighter regime produces enough information, comparability and credibility to justify the change.

The dispute is not about whether companies can describe their sustainability performance. It is about whether investors can compare those descriptions across the market.

What does CVM want to test?

CVM said the consultation would seek evidence that could corroborate or refute several propositions:

• Voluntary systems will not produce sufficient information, comparability and credibility.
• Reductions in companies’ cost of capital from mandatory reporting could exceed incremental compliance costs.
• Smaller companies will face proportionally higher compliance costs than larger companies.
• Conditions for voluntary participation could reduce the number of companies choosing to report.
• Successive regulatory changes may have caused unrecoverable investments and weakened the predictability of the framework.

The hypotheses cover both sides of the argument, from disclosure quality to the effect of repeated rule changes on companies that prepared to comply.

Which rules could replace the current regime?

CVM presented several alternatives for comment:

• Maintain the current regime.
• Adjust the conditions for voluntary participation.
• Phase in mandatory requirements by company size.
• Set a future date to shift to mandatory reporting.
• Make only climate-related reporting mandatory while leaving Scope 3 disclosures under comply-or-explain.
• Extend mandatory reporting beyond public companies.

CVM described one option as “phasing in mandatory requirements by company size” and another as “setting only climate-related reporting as mandatory.” That leaves room for a mandate, though not necessarily the mandate first proposed.

What decides the next regime?

The consultation closes on February 28, 2027. CVM then has to decide whether to retain the voluntary regime, restore mandatory reporting in some form, narrow a mandate to climate or widen its reach beyond public companies.

Until that decision, the amended comply-or-explain rules remain the operative framework for Brazilian public companies, and investors have no settled answer on comparability, cost or international alignment.

The decisive milestone is CVM’s post-consultation choice: voluntary reporting, phased mandates, or a climate-first requirement.