To better understand the main international regulations regarding ESG (Environment, Social and Governance) issues, the Brazilian Securities and Exchange Commission (CVM) published last May 26 the study The ESG agenda and the capital market - An analysis of ongoing initiatives, challenges, and opportunities for further reflection by the CVM.

Prepared by Assessoria de Análise Econômica e Gestão de Riscos (ASA), in collaboration with the Brazilian Institute of Corporate Governance (IBGC), the publication also aims to analyze the main mandatory or voluntary disclosure standards for ESG factors, and whether there is a more adequate and internationally accepted standard.

As part of the CVM Regulatory Agenda 2022, the study incorporates the regulatory priorities for this year, focusing on the relationship between the topic of sustainability, in its various forms, the capital market, and ESG issues.

In the study, the CVM indicates the existence of a global trend toward taking advantage of existing standards of disclosure. In addition, the agency highlights the risks and analyzes the disclosure of ESG factors in the Brazilian securities market.

In November of 2021, the CVM conducted a survey to understand the level of knowledge and interest of the investing public on ESG issues and their influence on investment choices (64% of the participants confirmed they already use ESG criteria in their decision-making process).

The agency also promulgated CVM Resolution 59/21, which expanded the set of ESG information that must be disclosed in the reference forms of publicly traded companies, demonstrating alignment with international initiatives.

The CVM has also been concerned with analyzing the interactions of some Brazilian public companies with securities market regulators in Australia, Canada, the United States, and the United Kingdom, who have contributed data on their regulations, guides, policies, overviews, and transparency standards used.

In this regard, we note a leading role for jurisdictions in the European Union and the United Kingdom, where regulations regarding ESG are already more robust, focusing not only on disciplining and standardizing the information disclosed and access to ESG information by regulators, but also on encouraging sustainable investment.

The regulatory benchmarking presented in the study leads to some conclusions, such as the noticeable increase in market interest in social responsibility policies, the growing demand for more consistent, comparable, and useful information for investment decisions, and the risks of greenwashing (the creation of a false appearance of sustainability through speeches, advertisements, and publicity campaigns that highlight supposedly ecologically/environmentally responsible and green practices) and potential penalties and sanctions applicable to irregularities related to the disclosure of ESG practices (which can already be observed, albeit at an incipient level, in some jurisdictions).

The CVM initiative highlights the importance of integrating ESG factors with the capital market, taking into account that non-financial risks are increasingly being considered by investors in their decision-making processes, due to the global perception of their economic and financial impacts.

The study supports the view that ESG issues have become sufficiently relevant to merit special attention from regulators in various jurisdictions, who are already promoting regulatory changes aimed at:

  • standardizing and disseminating access to information on ESG issues, in order to promote standardized and comparable disclosures to inform the public's investment decisions;
  • punishing and curbing disclosure irregularities on ESG topics (as in the case of greenwashing); and
  • fostering corporate sector adherence to ESG practices and inducing investment in sustainable sectors.