ESG & Climate Law in Brazil: 2026 Update

ESG and climate law in Brazil is no longer a voluntary framework. Mandatory disclosure rules, sector-specific sustainability requirements, and a growing body of climate-related legislation now impose concrete legal obligations on companies operating in the country. Brazil has positioned itself as a regional leader in green finance and climate governance, driven by its commitments under the Paris Agreement, the ambitions of its National Climate Change Policy, and the regulatory agenda of bodies such as the Securities and Exchange Commission of Brazil (CVM) and the Central Bank of Brazil (BCB). This guide covers the current legal architecture, recent regulatory updates, key compliance obligations, practical risks for foreign investors, and the direction of upcoming reforms.

Brazil';s approach to ESG and climate regulation rests on a layered structure of federal legislation, regulatory instructions, and voluntary frameworks that have progressively hardened into mandatory requirements.

The foundational statute is the National Climate Change Policy, established by Federal Law No. 12,187 of 2009. This law set Brazil';s national greenhouse gas reduction targets, created the National Climate Fund, and mandated sectoral mitigation and adaptation plans across industries including energy, agriculture, transport, and industry. It remains the backbone of Brazil';s climate governance architecture and the reference point for subsequent regulatory development.

The Brazilian Forest Code, Federal Law No. 12,651 of 2012, governs land use, native vegetation protection, and the Rural Environmental Registry (CAR). For companies in agribusiness, food production, or any sector with rural land exposure, compliance with the Forest Code is a direct ESG obligation. Failure to register rural properties in the CAR or to maintain legal reserves carries legal liability and reputational risk, particularly for export-oriented businesses subject to international supply chain scrutiny.

The National Policy on Solid Waste, Federal Law No. 12,305 of 2010, imposes obligations on producers, importers, distributors, and retailers regarding reverse logistics, packaging, and waste management. This law has direct operational implications for consumer goods, electronics, and packaging companies, and its enforcement has intensified in recent years.

The most significant recent development in ESG and climate law in Brazil for listed companies is the mandatory climate-related financial disclosure framework introduced by the CVM.

CVM Resolution No. 59, issued by the Comissão de Valores Mobiliários, requires publicly listed companies to disclose climate-related information in their annual reference forms. The resolution aligns Brazil';s disclosure requirements with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), covering governance, strategy, risk management, and metrics and targets. Companies must report on physical and transition climate risks, their potential financial impact, and the governance structures overseeing climate matters at board and management level.

The phased implementation schedule introduced by CVM Resolution 59 means that larger listed companies faced earlier compliance deadlines, while smaller issuers have been granted additional time. In practice, however, the market expectation - driven by institutional investors, index providers, and international creditors - has accelerated voluntary adoption well ahead of mandatory deadlines.

A common mistake among foreign-listed companies with Brazilian subsidiaries is assuming that group-level TCFD or CSRD reporting satisfies Brazilian CVM requirements. It does not. Brazilian disclosure must be filed in Portuguese, in the specific format prescribed by the CVM, and must address Brazilian-specific risk factors including Amazon deforestation exposure, water stress in key operating regions, and regulatory transition risk under Brazilian law.

The CVM has also signalled its intention to align future disclosure requirements with the International Sustainability Standards Board (ISSB) standards, specifically IFRS S1 and IFRS S2. Companies should treat current TCFD-aligned reporting as a transition phase toward full ISSB adoption, which will impose more granular Scope 1, 2, and 3 emissions disclosure requirements.

The Central Bank of Brazil has developed one of the most comprehensive sustainable finance regulatory frameworks in Latin America, making it a central actor in ESG and climate law in Brazil.

CMN Resolution No. 4,945 of 2021, issued by the National Monetary Council (CMN), requires financial institutions to implement Social, Environmental, and Climate Responsibility Policies (PRSAC). All banks, credit cooperatives, and payment institutions regulated by the BCB must adopt a PRSAC that identifies, assesses, classifies, and manages socio-environmental and climate risks across their portfolios. The policy must be approved at board level, reviewed periodically, and integrated into the institution';s overall risk management framework.

BCB Resolution No. 139 of 2021 introduced requirements for financial institutions to disclose socio-environmental and climate risk information, including scenario analysis and stress testing for climate-related exposures. Larger institutions face more detailed reporting obligations, including quantitative metrics on climate risk in their loan and investment portfolios.

The BCB has also developed a taxonomy of sustainable economic activities to guide green finance classification in Brazil. This taxonomy, aligned with international frameworks but adapted to Brazilian economic realities - including the role of hydropower, sugarcane ethanol, and sustainable agriculture - determines which assets qualify for green bond labelling, preferential regulatory treatment, and inclusion in sustainable finance products.

For foreign banks and financial groups operating in Brazil, a non-obvious requirement is that the PRSAC must reflect Brazilian-specific risk factors, not simply replicate a global group policy. Regulators have scrutinised whether local policies genuinely address Amazon-related deforestation risk, water scarcity in the Brazilian Northeast and Southeast, and the specific transition risks associated with Brazil';s energy matrix and land use patterns.

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Brazil has emerged as a significant issuer of green, social, and sustainability-linked bonds, and its regulatory framework for these instruments continues to develop.

The CVM and the BCB have both issued guidance on the issuance and disclosure requirements for green bonds and sustainability-linked bonds in Brazil. Issuers must disclose the use of proceeds, the environmental or social objectives pursued, the methodology for measuring impact, and the governance arrangements for monitoring and reporting. The Brazilian Association of Financial and Capital Market Entities (ANBIMA) has developed its own green bond certification programme, which has become a market standard for domestic issuances.

Brazil';s voluntary carbon market has attracted significant international interest, given the country';s vast forest resources and the potential for large-scale carbon credit generation through avoided deforestation and reforestation projects. The legal framework governing voluntary carbon credits in Brazil has historically been fragmented, but recent legislative developments have moved toward greater clarity.

Federal Law No. 15,042 of 2024, the Brazilian Carbon Market Law, established the legal basis for a regulated carbon market in Brazil, including a cap-and-trade system for certain sectors and a framework for the recognition and trading of carbon credits. The law creates the Brazilian Greenhouse Gas Emissions Trading System (SBCE), which will operate alongside the existing voluntary market. The SBCE is expected to cover sectors including energy, industry, transport, and waste, with regulated entities required to hold sufficient allowances to cover their verified emissions.

In practice, companies with significant Brazilian operations should assess whether they will fall within the scope of the SBCE, what their baseline emissions position is, and whether existing voluntary carbon credit holdings will be recognised under the new regulated framework. Many underestimate the lead time required to establish robust monitoring, reporting, and verification (MRV) systems that will satisfy regulatory requirements.

Beyond capital markets and financial sector rules, ESG and climate law in Brazil imposes obligations across corporate governance, supply chain management, and specific industry sectors.

Brazilian corporate law, governed by Federal Law No. 6,404 of 1976 (the Corporations Law), does not yet mandate ESG-specific board structures, but market practice and investor expectations have driven significant voluntary adoption of sustainability committees, ESG-linked executive remuneration, and integrated reporting. The Brazilian Institute of Corporate Governance (IBGC) has published ESG governance guidelines that are widely referenced by institutional investors and proxy advisers.

Supply chain due diligence is an area of growing legal exposure. Brazil does not yet have a mandatory human rights and environmental due diligence law equivalent to Germany';s Supply Chain Act or the EU';s Corporate Sustainability Due Diligence Directive (CSDDD). However, Brazilian companies exporting to the EU or operating as subsidiaries of EU-headquartered groups are increasingly subject to these requirements through their parent companies or customer contracts. A common mistake is treating supply chain ESG compliance as a purely European concern - Brazilian suppliers and subsidiaries are directly in scope of CSDDD obligations imposed on their EU counterparts.

The agribusiness sector faces particularly intense ESG scrutiny. The EU Deforestation Regulation (EUDR) requires importers of soy, beef, coffee, cocoa, palm oil, wood, and rubber into the EU to demonstrate that products are deforestation-free and comply with applicable laws in the country of production. For Brazilian exporters, this means maintaining documentation of land use compliance under the Forest Code, CAR registration, and supply chain traceability. Non-compliance can result in market access restrictions, which represent a material commercial and legal risk.

The energy sector is subject to Brazil';s National Energy Policy and the regulatory framework of the National Electric Energy Agency (ANEEL) and the National Petroleum Agency (ANP). Renewable energy projects, including wind, solar, and biomass, benefit from specific regulatory incentives but must also comply with environmental licensing requirements under the National Environmental Policy Act (Federal Law No. 6,938 of 1981) and the resolutions of the National Environment Council (CONAMA).

Enforcement of ESG and climate obligations in Brazil is carried out by multiple authorities, and the risk of regulatory action and civil litigation is material and growing.

The Brazilian Institute of Environment and Renewable Natural Resources (IBAMA) is the primary federal environmental enforcement authority. IBAMA has broad powers to impose administrative fines, suspend operations, and refer cases for criminal prosecution under the Environmental Crimes Law (Federal Law No. 9,605 of 1998). Environmental fines can be substantial, and corporate officers can face personal criminal liability for environmental offences committed with their knowledge or consent.

The Federal Public Prosecutor';s Office (Ministério Público Federal) has been active in pursuing climate and environmental litigation, including actions against companies for deforestation, illegal land use, and failure to comply with environmental licensing conditions. State-level prosecutors have similarly pursued enforcement actions, particularly in the Amazon region and the Cerrado biome.

The CVM has enforcement powers over listed companies'; disclosure obligations. Failure to file required climate disclosures, or filing materially misleading information, can result in administrative sanctions, fines, and reputational damage. The CVM has signalled that it will treat climate disclosure non-compliance with the same seriousness as financial reporting failures.

Civil liability for environmental damage in Brazil operates on a strict liability basis for certain activities under the National Environmental Policy Act. This means that companies can be held liable for environmental harm without proof of fault, and remediation costs can be significant. Environmental damage claims can be brought by public prosecutors, environmental agencies, or affected communities, and Brazilian courts have shown willingness to grant injunctions and award substantial damages.

A practical scenario: a foreign company acquires a Brazilian agribusiness operation and discovers, post-closing, that the target';s rural properties have irregular CAR registrations and outstanding IBAMA fines. Under Brazilian law, environmental liabilities can transfer with the asset, and the acquirer may face remediation obligations and ongoing enforcement exposure. Thorough environmental due diligence, including review of CAR status, IBAMA records, and environmental licensing, is essential before any acquisition in land-intensive sectors.

A second scenario: a multinational with a Brazilian subsidiary receives a request from its EU parent to provide Scope 3 emissions data for CSRD reporting. The subsidiary has no existing MRV system and limited internal capacity to compile the required data. Establishing compliant data collection processes, engaging a third-party verifier, and aligning with the parent';s reporting timeline typically requires six to twelve months of preparation. Companies that begin this process late face the risk of providing unverified or incomplete data, which can expose both the subsidiary and the parent to regulatory scrutiny.

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What are the main mandatory ESG disclosure obligations for companies in Brazil?

Listed companies in Brazil must comply with CVM Resolution No. 59, which requires climate-related financial disclosures aligned with TCFD recommendations in their annual reference forms. Financial institutions regulated by the BCB must implement a Social, Environmental, and Climate Responsibility Policy under CMN Resolution No. 4,945 and disclose climate risk information under BCB Resolution No. 139. Companies in regulated sectors such as energy, agribusiness, and mining face additional disclosure and reporting obligations under sector-specific legislation. Non-listed companies are not currently subject to mandatory ESG disclosure at the federal level, but supply chain requirements from customers and lenders are increasingly filling this gap in practice.

How long does it take to establish a compliant ESG framework in Brazil, and what does it cost?

The timeline depends heavily on the size and complexity of the business, the sector, and the starting point of existing data and governance systems. For a mid-sized listed company with no existing ESG infrastructure, establishing a compliant framework - including board governance, emissions data collection, third-party verification, and CVM-compliant reporting - typically takes between nine and eighteen months. Professional fees for legal, sustainability consulting, and verification services vary widely but generally start from the low tens of thousands of USD for initial gap assessments and rise significantly for full implementation and ongoing reporting. Companies that underestimate the internal resource requirements - particularly for data collection and management - frequently encounter delays and cost overruns.

Does Brazil';s regulated carbon market affect companies that already hold voluntary carbon credits?

The Brazilian Carbon Market Law establishes a regulated cap-and-trade system, but the interaction between the new regulated market and existing voluntary carbon credits is still being defined through implementing regulations. Companies that have purchased or generated voluntary carbon credits - for example, through REDD+ projects or reforestation initiatives - should monitor the implementing decrees and regulations closely to understand whether and how their existing credits will be recognised, converted, or grandfathered into the new system. In practice, companies with significant voluntary carbon positions should seek legal advice on the status of their holdings and the implications of the new regulatory framework for their climate strategy and balance sheet.

Brazil';s ESG and climate legal framework has moved decisively from voluntary to mandatory, with disclosure, risk management, and enforcement obligations now embedded across capital markets, banking, agribusiness, energy, and corporate law. The regulated carbon market, expanding CVM disclosure requirements, and the reach of international frameworks such as the EUDR and CSDDD make ESG compliance a core legal and commercial priority for any company with significant Brazilian operations.

VLO Law Firms advises international clients on ESG and climate law in Brazil. We can assist with regulatory compliance assessments, environmental due diligence, climate disclosure structuring, carbon market advisory, and engagement with Brazilian regulatory authorities. To request a consultation, contact: info@vlolawfirm.com