Since January 2, 2023, publicly traded companies have been required to indicate in their Reference Form whether or not they have adopted environmental, social and corporate governance (ESG) policies, a requirement introduced by Resolution 59 of the Brazilian Securities and Exchange Commission (CVM).
If the company has not adhered to ESG practices, it must provide explanations as to why it has not disclosed ESG information and key performance indicators, why it has not audited or reviewed any ESG information that may have been disclosed, why it has not adopted recommendations related to climate issues, and why it has not carried out greenhouse gas emission inventories, among others.
In the same vein, with regard to Investment Funds, the new regulatory framework – CVM Resolution 175, generally effective as of April 3, 2023, established that funds in any category whose name contains reference to environmental, social and governance factors, such as “ESG”, “ASG”, “environmental”, “green”, “social”, “sustainable” or any other terms related to sustainable finance, must establish: I – what environmental, social or governance benefits are expected and how the investment policy seeks to originate them; II – what methodologies, principles or guidelines are followed for the qualification of the fund or class; III – which entity is responsible for certifying or issuing a second opinion on the qualification, if any, as well as information on its independence in relation to the fund; and IV – specification on the form, content and frequency of disclosure of the report on the environmental, social and governance results achieved by the investment policy in the period, as well as the identification of the agent responsible for preparing the report.
If the investment policy integrates environmental, social and governance factors into the activities related to portfolio management, but does not seek to generate socio-environmental benefits, the use of the above terms is prohibited.
Pro-environmental initiatives based on ethics and sustainability, a high level of transparency and corporate responsibility have been treated as special concerns of the regulator with a functional system of corporate governance, capable, for example, of hindering the practice of conduct condemned by stakeholders, such as greenwashing, and thus attracting the trust (and resources) of potential investors.
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