The case for pursuing mandatory climate-risk disclosure in Brazil


In Brazil, public policy must comply with the National Policy on Climate Change (Law 12,187 of 29 December 2009) and observe the constitutional purpose of the Brazilian financial system, which includes serving collective interests, such as environmental protection. Therefore, the National Monetary Council (CMN), the Central Bank of Brazil (BCB) and the Securities and Exchange Commission (CVM) have a legal obligation to engage with the fight against climate change. More precisely, financial and capital markets regulators must consider environmental, social and governance (ESG) risks to properly fulfill their legal mandate of safeguarding financial stability, ensuring capital and financial markets’ efficiency and protecting investors. This essay argues that climate disclosure is a necessary condition for assessing climate risk and making financial and capital markets greener, by describing existing policies and regulations in Brazil. It then explores regulatory approaches to climate disclosure, concluding that, after a transition period, mandatory climate disclosure based on standards compatible with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations is the most effective way to achieve comparability and transparency around climate risk in the Brazilian financial and capital markets.

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