On December 22nd, 2021, the Brazilian Securities and Exchange Commission (CVM), after a process which led to a public hearing initiated in December 2020, altered its Instructions No. 480 and No. 481 through the publication of Resolution No. 59, which, through adjustment of the reference form, intends to simplify the system for disclosure of information by publicly held companies and foster innovations of report guidelines on social, environmental and corporate governance aspects regarding their activities within the ESG field.
The reference form is considered one of the main mandatory documents of publicly held companies, intended to inform investors about fundamental data of the invested companies. The form, which is disclosed on an yearly basis, was simplified to: (i) reduce the scope information from three to one fiscal year; (ii) focus on the five main risk factors over the others; and (iii) restrict officers’ comments only to significant modifications of financial and cash flow statements, instead of each and any item of the financial statements.
Regarding ESG practices, the new text, which predominantly has a guidance characteristic, adopts the “declare or explain” so-called model, and aims at encouraging companies to develop the highlighted aspects in order to avoid possible reputational damage from exposing their omission to investors. The following innovations should be emphasized:
- To inform the means for disclosure (such as the annual report or another specific document), the methodology applied, if the report is audited or reviewed, where it can be found, if the objectives of Sustainable Development from ONU are being adopted (ODS) (such as poverty eradication, zero hunger, sustainable agriculture, health and wellness; and quality education) as well as the self-regulation pattern from Task Force on Climate-Related Disclosures. Any negative answers must be duly explained;
- To disclose if the company controls the inventory of greenhouse gas emissions and the scopes contemplated for its analysis. All negative answers must be duly explained as well;
- To report separately which are the social, environmental and climate risks, within the chapter regarding risks with potential to influence an investment decision, also indicating its mitigation policies and business opportunities;
- To provide the number of employees by gender, ethnic or color, and age group in all hierarchical levels, including the Board of Directors;
- To indicate the ratio between the biggest individual remuneration and the average individual remuneration of all employees;
- To describe the role of the Officers and the Board of Directors on the evaluation and management of climate risks; and
- To inform the channels developed by the company to communicate the Board all aspects related to ESG.
The resolution comes into effect in January 2023.
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