Brazil’s Securities and Exchange Commission (CVM) announced that it has amended its regulation requiring public companies to publicly provide annual ISSB-aligned sustainability and climate-related disclosures, moving instead to a voluntary sustainability reporting system. Mandatory sustainability reporting was set to next year, on 2026 data.

While revoking the mandatory requirements, however, CVM’s updated regulation requires companies that opt out of sustainability reporting to publicly announced their decision, and retains the ISSB-based standards as the required framework for companies that proceed to report on climate and sustainability.

Brazil’s CVM had initially announced its sustainability reporting requirements for public companies in 2023, with mandatory disclosures beginning for fiscal years starting on or after January 1, 2026. The regulator subsequently approved sustainability reporting standards in published by the Brazilian Sustainability Pronouncements Committee (CBPS), that were based on the IFRS Foundation’s International Sustainability Standards Board’s (ISSB) general sustainability (IFRS S1) and climate (IFRS S2) reporting standards.

The revised regulation, while making sustainability reporting voluntary, creates a “comply-or-explain” system, under which a public company that choose not to file a sustainability report are required to justify the decision through a market announcement, including the reasons for the decision, by the time it files its annual financial statements in 2027.

For companies that proceed with sustainability reporting, the regulation requires compliance with the CBPS and ISSB standards. The regulation also requires companies that proceed to prepare sustainability reports for at least three consecutive years. Additionally, if a company opts to stop reporting, the regulation requires it to disclose its decision through a market announcement in the fiscal year before it stops reporting.

In its statement announcing the updated regulation, the CVM said:

“The changes aim to improve the voluntary adoption model, preserving the transparency and comparability brought about by the need to comply with accounting standards, but restoring the necessary respect for the freedom of entities to estimate the expected costs and benefits of their decisions on how to use investor resources.”