In a decision poised to reshape the relationship between the financial sector and sustainability practices, Brazil’s National Monetary Council (CMN) approved a resolution on December 21 requiring major financial institutions to publish detailed sustainability reports starting in 2026. This measure goes beyond meeting global demands; it represents a commitment to transparency and socio-environmental responsibility, aligning Brazil with the highest international standards.

The new regulation will be mandatory for financial institutions classified as publicly traded companies—those whose shares are listed on stock exchanges—and for leading entities in large financial conglomerates within the S1, S2, and S3 segments. These segments are defined by the Central Bank based on the size, systemic relevance, and operational complexity of the institutions.

The rule also extends to any institution that already publishes consolidated annual financial statements under the international standards established by the International Accounting Standards Board (IASB). Furthermore, even those not required to comply but opting to voluntarily disclose financial information under international standards must submit sustainability reports following the same framework.

This obligation underscores the measure’s broad scope and ensures that the financial sector advances consistently in integrating sustainability practices into its operations, regardless of size or structure.

The sustainability reports must strictly adhere to the IFRS S1 and IFRS S2 standards issued by the International Sustainability Standards Board (ISSB), a globally recognized body for setting sustainability benchmarks across various industries.

What is IFRS S1?
This standard outlines general guidelines for disclosing financial information related to sustainability, encompassing risks and opportunities that may impact an institution’s financial performance. It requires banks to detail how social, environmental, and governance issues affect their operations, strategies, and outcomes.

And IFRS S2?
IFRS S2 focuses on climate-related issues, such as measuring greenhouse gas (GHG) emissions, environmental impact mitigation plans, and strategies for adapting to climate change. Institutions must demonstrate how they address climate risks and how their operations contribute to or align with global efforts to combat climate change.

Additionally, the CMN resolution mandates that this information be audited by independent firms, ensuring the accuracy, credibility, and reliability of the disclosed data.

The requirement will be implemented gradually, taking into account the characteristics and sizes of the institutions:

Starting in 2026:
The requirement will apply to institutions in the S1 and S2 segments, which include the largest banks and financial conglomerates in the country.

Starting in 2028:
Banks and financial institutions classified under the S3 segment, as well as those voluntarily opting to disclose financial data under international standards, will also be subject to the rule.

Those choosing voluntary adoption before the established deadline must fully comply with ISSB standards, without any adjustments or modifications.

This phased approach aims to ensure that financial institutions have adequate time to prepare for the new requirements, adopting tools, technologies, and methodologies that guarantee the quality of the information presented.

The main objective of this resolution goes beyond regulatory compliance: it seeks to foster greater transparency and trust in Brazil’s financial market. Starting in 2026, investors will have access to more detailed, comparable, and reliable information about how banks manage sustainability-related risks and opportunities.

This transparency is crucial for attracting capital from global investors, who are increasingly attentive to ESG (environmental, social, and governance) criteria when deciding where to allocate resources. According to the CMN, the measure facilitates informed and responsible decision-making by investors, promoting a smoother transition to a sustainable, low-carbon economy.

The resolution also positions Brazil strategically on the international stage, highlighting the country as an economy that recognizes and responds to the need to integrate sustainability into its economic and financial foundations.

The measure approved by the CMN aligns with CVM Resolution No. 193/2023, which regulates corporate disclosure in Brazil, including sustainability aspects. This harmonization between different regulatory bodies ensures that Brazilian companies operate under consistent guidelines, facilitating data comparability and alignment with global standards.

The resolution will take effect on January 1, 2025, granting at least a one-year adaptation period before the first wave of mandatory reports. During this time, financial institutions must:

• Assemble specialized teams to collect and analyze sustainability-related data;
• Implement systems and processes that meet IFRS S1 and S2 requirements;
• Conduct audits and simulations to validate information before disclosure.

This preparation period will also enable institutions to develop more robust reports, elevating industry standards and meeting the expectations of investors and regulators.

With this resolution, the CMN not only regulates but also paves the way for a more responsible financial sector committed to addressing the environmental and social challenges of the 21st century. The mandatory publication of sustainability reports is a milestone reinforcing the role of financial institutions as agents of economic and social transformation, aligned with the Sustainable Development Goals (SDGs) and the Paris Agreement.

The decision sets an important precedent for other sectors and reaffirms Brazil as a leader in promoting sustainable practices in the global market. The commitment to sustainability is not just a regulatory necessity but an opportunity to build a fairer, more resilient, and sustainable future for all.