Entities criticize demand for flexibility in sustainability standards | Businesses

The group says relaxing or repealing the rules would represent a “significant setback” for the efficient functioning of Brazil’s capital market.

The letter was jointly signed by the Brazilian Institute of Independent Auditing (Ibracon), the Federal Accounting Council (CFC), the Association of Capital Market Investors (Amec), the Association of Capital Market Analysts and Professionals (Apimec) and the Foundation of the Institute of Accounting, Actuarial and Financial Research (Fipecafi).

The document was prepared following the statement presented last week by the Brazilian Association of Public Enterprises (Abrasca), which requested flexibility in the adoption of standards.

Abrasca called for the CVM to be adopted voluntarily by public companies, at least initially, which would represent an “appropriate balance” between the necessary international convergence and the reality of the national market and the current legislative challenges impacting the accounting and financial areas of public companies.

If this proposal cannot be accepted, the association suggests that the start of the obligation be extended by at least three years, with progressive application depending on the size and structure of the companies.

In response, the entities emphasized that the adoption of sustainability standards should not be analyzed only from the formal point of view of regulatory compliance, but above all in light of their economic, informational and institutional effects, since sustainability information, when material from a financial point of view, “integrates the set of data essential for an adequate valuation of assets, an assessment of risks and an efficient allocation of capital”.

The group says that relaxing or repealing standards tends to intensify “the risk of informational arbitrage” on sustainability issues.

“The absence of comparable, consistent, and financial statement-related minimum information requirements creates an environment in which different issuers begin to disclose heterogeneous, selective, or incomplete information, making it difficult to distinguish between effective economic and financial performance and unverifiable strategic narratives,” they argue.

In this context, the signatories highlight that more sophisticated investors, with greater capacity to access private information or proprietary analyses, now hold significant informational advantages, to the detriment of the average investor, undermining the informational fairness that underpins the efficiency of capital markets.

The letter also lists the risks of information asymmetry, weakening the link between sustainability information and traditional financial statements, reputational risk for the CVM and deterioration of the perception of the Brazilian market itself among international investors.

“Regulatory predictability and consistency are central to the attractiveness of emerging markets, and regulatory rollbacks on sustainability issues tend to be interpreted as an increase in institutional risk, with direct impacts on the cost of sovereign and corporate capital,” they say.

The letter also refutes arguments that adopting financially oriented sustainability standards generates disproportionate additional costs, particularly compared to the informational benefits and reduced uncertainty perceived by investors, which could even lead to a reduction in the cost of obtaining loans and future financing.

“More than a specific regulatory debate, this is a decision with structural effects on market efficiency, the cost of capital and the institutional credibility of the country. Maintaining and improving the sustainability disclosure regime must therefore be understood as central elements of a program to strengthen the capital market, and not as a regulatory burden divorced from economic reality,” they say.

Disclosure of the new sustainable development report will be mandatory from financial years beginning January 1, 2026.