On April 26, 2021, the Central Bank of Brazil (BCB) launched a new public consultation (No. 86/2021, the “Consultation”) on a proposed regulation for mandatory disclosure of social, environmental, and climate risks by financial institutions.

Climate-related risks must be disclosed in accordance with the TCFD Recommendations (“Recommendations”), including both physical and transition risks. As for environmental and social risks, the Consultation indicates that disclosure must be aligned with ESG criteria.

The draft resolution under the Consultation establishes that, starting in 2023, financial institutions will submit an annual Report on Social, Environmental and Climate Risks and Opportunities with information on the previous year (up to December 31, 2022). Reporting will be made using standardized tables inspired by Pillar 3 of the Basel Framework. The reports will be made publicly available online for 5 years.

Disclosure of information on quantitative indicators used to manage risks and on business opportunities will be optional.

The BCB intends to regulate disclosure in two phases. The first phase is the object of the Consultation and covers qualitative aspects of the Recommendations, focused on governance, strategies, and risk management. The second phase will cover quantitative aspects of the Recommendations (metrics and targets).

The Consultation closes on June 5, 2021.