Brazilian companies, especially publicly traded companies, are preparing for a transition in the format of reporting their results, opportunities, and risks related to sustainability. After the launch, on 26/06/2023, of the new standards for IFRS sustainability reporting, the CVM - Securities and Exchange Commission recently issued a resolution on 20/10/2023 for companies to submit this sustainability and ESG risk management information, making voluntary membership by 2026 and after that deadline mandatory for publicly traded companies, investment funds and securitizers.
The decision places Brazil in the lead of the countries that adopted the new criteria of the International Council for Sustainability Standards (ISSB) regarding sustainability reports from Brazilian companies.
Adherence to the measure will be voluntary until 2026, when it will become mandatory for publicly traded companies, investment funds and securitizers. As of 2027, disclosure will be mandatory and will take place three months after the fiscal year or simultaneously with the financial statements. The decision is linked to the Ecological Transformation Plan, launched this year by the Ministry of Finance. It is a complex economic and social development plan, with robust environmental preservation and technology components.
The inaugural standards established by the international board, S1 and S2, help improve trust in companies' disclosures about sustainability, with the purpose of informing investment decisions. The report must follow the standards for standardization of International Sustainability Standards Board, and it will need to contain information regarding opportunities and risks related to climate and sustainability. With this, for the first time, a common language will be created to disclose the effect of climate-related risks and opportunities on a company's prospects.
Understanding IFRS S1 and S2:
The International Council for Sustainability Standards (ISSB in English) launched its first standards focusing on sustainability on 26/06/2023. IFRS S1, with a focus on sustainability, and IFRS S2, focused on climate factors. IFRS S1 and IFRS S2 focus on investors, shareholders, and funders, so they also help to improve standardization, maturity, and trust regarding the information released by companies on the topics. The standards will also contribute to the decision-making process of investors and organizations.
The purpose of IFRS S1 is the obligation for a company to disclose information about its risks and opportunities related to sustainability, in a useful way to users. IFRS S2 complements IFRS S1, more specifically with regard to climate risks and opportunities.
The role of IFRS S1 and S2 is considered essential in promoting global accounting standardization, financial transparency, and corporate governance related to sustainability and climate. According to experts, in addition to benefiting companies by facilitating access to investments and international trade, they also bring advantages to society, allowing financial information related to sustainability and climate to be presented in a clear and reliable manner.
There are many opinions that the changes will be beneficial, but there is still a lot of concern regarding the trajectory of preparing companies to comply with the regulations. It is strongly recommended that detailed diagnoses be carried out within companies to begin the process, mainly understanding the current maturity level of their disclosures and how their team of specialists in financial and sustainability reporting is doing.
To access CVM Resolution 193 in full on the official website, click on the link below:
https://conteudo.cvm.gov.br/legislacao/resolucoes/resol193.html
Contact TATICCA — ALLINIAL GLOBAL, which provides integrated auditing services, internal auditing, accounting, taxes, corporate finance, financial advisory, risk advisory, technology, business consulting and training, for more information, at www.taticca.com.br or e-mail taticca@taticca.com.br and learn more. Our company has certified methodologies for carrying out activities.
