On December 7, 2020, the Brazilian Securities and Exchange Commission (CVM) launched a consultation on proposed amendments to Normative Ruling 480/2009 aimed at, inter alia, increasing transparency by improving the quality of information disclosed by publicly-held companies on ESG aspects.
Following the global trend of enhancing and simplifying disclosures—similar to what the US Securities Exchange Commission (SEC) has recently done with Regulation S-K—CVM’s main goal is to reduce compliance costs while also responding to investors’ increasing demand for better ESG data. In this Blog Post, we highlight the main ESG-related amendments proposed by CVM in this new consultation paper.
Even though many companies follow international standards to prepare their sustainability reports (e.g. GRI Standards), there is a lack of standardization of the ESG data disclosed in the annual reports (formulários de referência) filed with CVM and made publicly available to investors and consumers.
The main amendments proposed in connection with ESG aspects include:
- Breaking the “socioenvironmental risk factors” down into three separate categories: social matters, environmental matters, and climate matters;
- Requiring companies to report on the adoption of a materiality matrix and key performance indicators (KPIs) for environmental and social matters;
- Requiring companies to report on which of the UN Sustainable Development Goals (SDGs) are the most relevant in the business context;
- Adopting the “Comply or Explain” approach, requiring companies that do not release sustainability reports or do not adopt KPIs for environmental and social matters to explain why they do not;
- Requiring companies to report on diversity in the workforce and in the management structure and the channels through which critical environmental and social matters can be brought to the Board of Directors; and
- Requiring companies to report on pay gaps and whether environmental and social indicators affect executive compensation.
The consultation closes on March 8, 2021.