In order to reform and simplify the information regime disclosed by the publicly-held securities issuing companies, the Brazilian Securities and Exchange Commission (CVM) issued, on December 23, 2021, the Resolution CVM 59. Among the changes brought by this standard, we highlight those related to the reference form, which underwent relevant changes in its structure, with a considerable reduction in the number of sections.

In its new version, the form will have 13 sections (compared to the current 21). The change resulted in the exclusion of some sections and the inclusion of new disclosure obligations by publicly-held companies in categories "A" and "B", especially with regard to information relating to environmental, social and governance (ESG) issues and climate information.

The new reference form will enter into force on 2 January 2023 and will apply to the disclosure of information relating to the financial year ending 31 December 2022.

The table below illustrates the changes in the structure of the sections in relation to the current standard, as provided for in Annex C to CVM Resolution 59:

The main novelty brought by CVM Resolution 59 is the obligations to disclose ESG information and climate. The change is a reflection of investor behavior and the growing market interest in greater transparency of companies in relation to compliance, in addition to commitment to these themes. The change also meets the longing for a standardization of the information provided, following what has already been done by regulatory agencies in international capital markets.

To provide greater transparency, the "practice or explain" model was used, already incorporated in the Governance Report of publicly held companies of the Brazilian Institute of Corporate Governance (IBGC). The goal is to get publicly-held companies to implement or at least justify the non-implementation of ESG practices in their reference forms, allowing investors to analyze whether the practices adopted by a company are consistent and adapt to ESG standards disseminated by the market.

The ESG and climate information will fully apply to category "A" companies and will be partially applicable to the category "B" companies. They will appear in at least six sections of the new reference form, as we highlight below:

• 1. Issuer activities:

"1.9. In relation to environmental, social and corporate governance (ESG) information, indicate:"

The company shall indicate, for example, whether it discloses its information in an annual or corresponding report, the methodologies used in the preparation of the report, whether it is audited by an independent entity and whether it considers any materiality matrix and ESG performance indicators, as well as the Sustainable Development Goals (SDGs) of the United Nations (UN). If so, the company should indicate whether any of the indicators and/or SDDs are material for its business.

Regarding climate responsibility, the company should also clarify whether the report considers the recommendations of recognized entities related to climate issues, in addition to pointing out whether it carries out greenhouse gas emission inventories in detail.

If the company does not comply with any of the conduct, it must justify in sub-item "i" item 1.9.

• 2. Comments of officers

"2.10. Officers should indicate and comment on key elements of the issuer's business plan, specifically exploring the following topics:"

The company's officers should clarify the opportunities included in the issuer's business plan related to ESG issues.

• 4. Risk factors

"4.1. Describe risk factors with the effective potential to influence the investment decision by observing the categories below and, within them, the decreasing order of relevance"

Among the risk factors, the company should include factors on social, environmental and climate issues, including physical and climate transition risks.

• 7. General Meeting and Administration

"7.1. Describe the main characteristics of the administrative bodies and the supervisory board of the issuer"

The company shall provide social information on the composition of the above-mentioned bodies, indicating the total number of members grouped by self-declared identity of (i) gender; (ii) color or race; or (iii) diversity attributes that you understand relevant. In addition, it should indicate specific objectives that the company has in relation to the diversity in these bodies.

Regarding climate issues, the company should indicate the role of management bodies in the assessment, management and supervision of risks and opportunities related to climate.

"7.2. in relation specifically to the Board of Directors"

It should be declared whether there are channels established for critical issues related to ESG and compliance issues and practices to come to the board's attention.

• 8. Remuneration of directors and officers

"8.1. Describe the remuneration policy or practice of the board of directors, the statutory and non-statutory officers, the fiscal council, the statutory committees and the audit, risk, financial and remuneration committees"

When describing the elements that make up remuneration, the main performance indicators should be indicated, including, where appropriate, indicators related to ESG issues. We highlight that this item will be optional to companies with registration of category "B".

• 10. Human resources

"10.1. Describe the sender's human resources"

The total number of employees and groups should be indicated, based on the activity performed, geographical location and diversity indicators, which, within each hierarchical level of the company, cover self-declared gender identity, self-declared identity of color or race and age group. We clarify that this item will be optional to companies with registration of category "B".

The wide inclusion of ESG factors in the reference form demonstrates the importance that CVM and the market have been giving to the theme. The change follows the trend of international markets and shows the commitment to encourage companies to realize the importance of the effective implementation of environmental, social and governance practices in their business.

Companies should pay special attention to the changes, even if they will only come into force next year, as the practical and strategy changes often necessary for fulfilling obligations are not always simple and quick to implement.