Climate Governance Initiative


3 August 2023

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Brazil is a signatory to the United Nations Framework Convention on Climate Change International Climate Change Agreement (Paris Agreement), which has been internalized through the Federal Decree No.9.073/2017

Brazil updated its Nationally Defined Contribution (NDC) in March 2022, committing to reducing its greenhouse gas emissions by 37% by 2025, and 50% by 2030 compared with 2005, as well as a long-term objective to achieve climate neutrality by 2050.1 In April 2022, the 4th Panel of the 3rd Region’s Court of Appeals held that the Paris Agreement has been granted the status of domestic law in Brazil, and the NDC has the form of domestic legislation which can be enforceable and justiciable in the national courts.2 In an emblematic trial held on July 1, 2022, the Federal Supreme Court, among other arguments that supported his decision, Justice Luis Roberto Barroso stated that “[…] the Paris Agreement is equivalent to a human rights treaty”. As a consequence, the Paris Agreement has currently the status of a supralegal norm within Brazilian legal framework. 

In December 2019, the Environmental Committee of the Federal Senate conducted an evaluation of the National Policy on Climate Change, to assess the main difficulties facing its enforcement and to identify the areas requiring amendment. This assessment resulted, among others, in Constitutional Amendment Bill No. 233/2019, which aims to include in the Brazilian Federal Constitution a provision stating that all economic activity in Brazil must be guided by the need to “promote climate stability, by usage of mitigating measures to prevent climate change and adapt to its negative effects”. 

In October 2021, Decree 10.846/2021 instituting the National Programme for Green Growth was enacted, which establishes a ‘green growth’ programme aiming to improve sustainable development, create green jobs, promote the conservation of forests and biodiversity, and reduce greenhouse gas emissions with a view to facilitating a transition to a low carbon economy. Other related policies were enacted or are under discussion, such as the Federal Strategy to Encourage the Sustainable Use of Biogas and Biomethane (introduced by Decree 11,003/2022) and the National Hydrogen Program (instituted by CNPE Resolution No 6/2022). In May 2022, Federal Decree No. 11.075/2022 was published, which establishes guidelines for the preparation of Sectoral Plans for Mitigating Climate Change, and creates the National System for the Reduction of Greenhouse Gas Emissions (SINARE). Once fully established, SINARE would function as a centralized registry for recording greenhouse gases emissions, removals, reductions and compensation, as well as acts of trade, transfers, transactions, and retirement of certificates of emission reduction credits.

According to the SINARE Decree, agents operating in the sectors of (i) electricity generation and distribution; (ii) urban public transportation and interstate passenger and freight transportation systems; (iii) manufacturing and consumer durables industry; (iv) fine and basic chemical industry; (v) pulp and paper industry; (vi) mining (vii) civil construction; (viii) health services; and (ix) agriculture and livestock will have greenhouse gas emission reduction targets established by the Executive Branch in the Sectoral Climate Change Mitigation Plans. The Decree innovated by defining carbon credits as financial assets, but it is subject to further regulation. 

Furthermore, there are several bills under discussion in the National Congress aiming at regulating a carbon market in Brazil, and the perspective is that soon the regulation on this subject would be defined and approved. In March 2023, the Chamber of Deputies approved the Provisional Measure No. 1.151/2022, which amends the rules of the Public Forests Management Law (Law No. 11.284/2006), in order to stimulate the carbon credits market. In general, the amendments provide that carbon credits and other environmental services arising from the reduction or removal of GHG emissions may be included in the object of concessions for public forests, conservation units, public lands and assets of federal entities.

Directors' Duties and Climate Change

Limited liability companies (sociedades limitadas) and corporations (sociedades anônimas) are the most common types of companies in Brazil and are legally formed as for-profit organizations. The Brazilian legal framework, in particular (i) the Federal Constitution of 1988, as amended (Brazilian Federal Constitution), (ii) Law No.10.406, as of 10 January 2002, as amended (Brazilian Civil Code),3 and (iii) Law No.6.404, as of 15 December 1976, as amended (Brazilian Corporation Law), provide, at least indirectly, that companies must follow sustainability and climate-related principles alongside their corporate purpose.

The Brazilian legal system lays out a series of principles that guide the conduct of economic activity, such as the social function of ownership, the social function of contracts, environmental protection, and the reduction of regional and social inequities, as stated in the Brazilian Federal Constitution4 and in the Brazilian Civil Code.5 Generally speaking, these principles apply to all entities comprising the Brazilian economy and, thus, it could be argued that all corporations and limited liability companies, including their directors and administrators, have an implicit duty to employ best efforts to, at least, minimize negative sustainability impacts, including climate change.

Moreover, Brazilian Corporation Law also focuses indirectly on sustainability matters, assigning fiduciary responsibility to managers and controlling shareholders. In this regard, articles 1166 and 1547 of the Brazilian Corporation Law contain provisions regarding the need to harmonize the interest of each company in generating profits with its socio-environmental impacts.8 In this sense, Item VI of article 170 of the Brazilian Federal Constitution also states that all economic or financial activity conducted in Brazil must be guided by the principle of environmental protection.9

Additionally, Brazilian Environmental Policy imposes a series of procedures to prevent, mitigate and repair environmental damage, which must be observed by all companies. Although there are no specific duties for directors on climate change, if companies fail to observe these norms and contribute – even indirectly – to environmental damage, they may be liable in civil court for strict, joint and several liability for environmental degradation.

Furthermore, Law No.9.605, of 12 February 1998, which establishes the Brazilian environmental crimes and administrative sanctions, imposes criminal and administrative penalties on individuals and legal entities whose conduct and activities are damaging to the environment. Individuals (such as directors)10 or legal entities that commit a criminal offence against the environment may also be punished with sanctions that range from fines to imprisonment (individuals) or dissolution (legal entities). Administrative liability further includes the imposition of fines and, in worst-case scenarios, the total suspension of activities. It is important to note that, pursuant to Law No.9.605, shareholders may be held liable through the piercing of the corporate veil, which will be admitted whenever the corporate entity becomes an obstacle to the recovery of environmental damages.

Therefore, despite the fact that most current laws and regulations do not directly require directors to consider climate change matters, when analysing the Brazilian legal framework, it is possible to argue that board directors and controlling shareholders, could, in some cases, potentially be in breach of their fiduciary duties in the event that they pursue goals that, in any manner, are contrary to the long-term interests of their community and society as a whole and, to this end, contrary to preventing climate change.

Besides legislation and regulations, sustainability-related matters have gained increasing prominence in the Brazilian financial and capital markets, as several Brazilian stakeholders have recently been taking initiatives or shown their concern for sustainability and environmental impact. For instance, the Social and Economic Development Bank (Banco Nacional do Desenvolvimento Econômico e Social – BNDES) has recently included the generation of positive sustainability impact in the qualification requirements of its tendering processes, and has also adopted a screening process to filter projects with negative sustainability impact out of its portfolio. 

Directors’ Disclosure Obligations and Climate Change 

Brazilian Corporation Law charges the board directors and other bodies comprising limited liability companies and corporations with the duty to disclose, in general and whenever necessary, all information that may negatively affect the environment, among others. The duty to inform, in addition to best practices as defined by Brazilian soft law, create the conditions for investors, the market and supervisory bodies to conduct complex analyses of the actions taken by companies and their impacts on the environment and other sustainability issues.

In this regard, Rule No. 80/22 of the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários – CVM) establishes an obligation for publicly-held corporations to disclose in their filings (i) risk factors related to environmental matters, (ii) the effects of regulation on the company’s environmental aspects and compliance costs and (iii) information related to ESG aspects.

In December 2021, the CVM issued CVM Resolution 59, republished by CVM Resolution 87, which came into effect on 2 January 2023. CVM Resolution 59 amends Rule No. 80/22 to oblige publicly-held corporations to disclose, on a comply or explain basis, certain ESG information, including (i) the main aspects of their compliance with legal and regulatory obligations, (ii) key performance indicators on ESG metrics, (iii) description of the role of the administrative bodies in the assessment, management, and supervision of climate-related risks and opportunities, (iv) a statement of whether the company carries out greenhouse gas emissions inventories and the scope of the emissions inventoried, and (v) a statement of whether the disclosure on climate risks is consistent with TCFD recommendations, the SDGs, or other recommended sustainability-related financial disclosures. 

Voluntary disclosure standards continue to provide frameworks for Brazilian companies’ sustainability disclosures. The Corporate Sustainability Index (Índice de Sustentabilidade Empresarial - ISE B3), a voluntary initiative that classifies publicly-held corporations with regard to sustainability matters, also sets out a series of details that must be presented by the selected companies in relation to the environment, with a specific questionnaire on climate change. Among other information, companies are required to disclose an assessment of both their impact on the climate and their exposure to climate-related impacts, as well as their plans to manage and prevent such impacts. 

Another voluntary initiative is the CDP Brazil Climate Resilience Index, created in March 2020 by the British NGO Carbon Disclosure Project (CDP). This index aims to establish a connection between companies’ disclosure of environmental data and their financial performance. It serves as a reference for investors to assess the companies’ transparency regarding the policies and actions adopted in relation to climate change, reinforcing the drivers seen in Brazilian capital markets for directors to take responsibility for their decisions regarding climate-related disclosures. In 2021, the questionnaire used underwent specific changes, such as the inclusion of a question regarding net-zero targets.

Additional provisions for financial institutions

The Central Bank of Brazil (BCB) has recognised the risks posed by climate change to financial stability, and has set out its views and actions it is taking in its first report on Social, Environmental and Climate-related Risks and Opportunities.11 The BCB has also passed regulations requiring in-scope financial institutions to publish a Report on Social, Environmental and Climate-related Risks and Opportunities including information on governance of climate-, environmental- and social-related risks, the real and potential impacts of those risks, and the processes for managing those risks.12 The BCB also passed a regulation requiring financial entities to adhere to a set of Social, Environmental and Climate Responsibility Policy principles (PRSAC) in conducting their business. In-scope companies are required to appoint a director responsible for complying with these guidelines. 13

Practical Implications for Directors

Given that Brazilian representatives and regulators have become increasingly emphatic in recommending – and soon regulating – the need for companies and their directors to adopt climate resilience measures in business practices and disclosure, in particular the above-noted Constitutional Amendment Bill No. 233/2019, the Brazilian Civil Code, Brazilian Corporation Law, Brazilian Environmental Policy and the CVM’s Resolution 80, amended by Resolutions 59 and 87, together with related public and private financial institutions initiatives, well-counselled boards will:

  1. delegate climate risk identification and evaluation to a clearly-identified team in management which reports directly to the CEO and board; 
  2. put on the agenda for the board within 3 or 6 months a process to initiate the development of a climate transition roadmap to 2050 with transparent carbon neutrality or reduction science-based targets, with clear interim targets to 2040, 2030 and the current rolling multi-year strategic plan validated by internationally recognized organizations, and periodically thereafter report back to the board;
  3. delegate to the appropriate committee(s) of the board, such as risk, audit, legal and governance, scenarios/strategy, nominations/remuneration, or sustainability/corporate responsibility, the task of translating the long-term strategy into a clear decision-making process for each aspect that is relevant to each committee; and
  4. discuss with disclosure counsel, in order to develop an external engagement and communications plan including qualitative and quantitative disclosures, to avoid publishing potentially misleading information.


  • Lina Pimentel Garcia, Mattos Filho Brazil
  • Tábata Boccanera Guerra de Oliveira, Mattos Filho Brazil
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End notes:

1: Federative Republic of Brazil, Paris Agreement Nationally Determined Contribution (21 March 2022) <>.
2: Federal Union v Silva et al., Interlocutory Appeal No 5016374-49.2021.4.03.0000.
4: Article 170 of the Brazilian Federal Constitution. “The economic order, founded on the appreciation of the value of human work and on free enterprise, is intended to ensure everyone a life with dignity, in accordance with the dictates of social justice, with due regard for the following principles: [...] III – the social function of ownership; [...] VI – environment protection, which may include differentiated treatment in accordance with the environmental impact of goods and services and of their respective production and delivery processes; [...] VII – reduction of regional and social differences; [...]”.
5: Article 421 of the Brazilian Civil Code. ”The contractual freedom shall be exercised within the limits of the social function of the contract.”
6: A controlling shareholder shall use its controlling power in order to make the corporation accomplish its purpose and perform its social role, and shall have duties and responsibilities towards the other shareholders of the corporation, those who work for the corporation and the community in which it operates, the rights and interests of which the controlling shareholder must loyally respect and heed.
7: An officer shall use the powers conferred upon him by law and by the bylaws to achieve the corporation’s corporate purposes and to support its best interests, including the requirements of the public at large and of the social role of the corporation.
8: Article 154, paragraph 4 of the Brazilian Corporation Law. In view of the corporation's social responsibilities, the administrative council or the board of directors may authorize the performance of reasonable gratuitous acts to benefit the employees or the community to which the corporation belongs.
9: On this subject, the Brazilian Federal Supreme Court rendered a decision stating that “economic activity must not be enacted in opposition to the principles established to enforce environmental protection.” (Brazilian Federal Supreme Court, Direct Action for the Declaration of Unconstitutionality No.3,540, Judge Rapporteur Justice Celso de Mello, judgement rendered on 09.01.2005, published on 2 March 2006). Pursuant to Article 927 of the Brazilian Code of Civil Procedure (Federal Law No.13,105, of 16 March 2015), this a binding precedent that must be observed by the courts.
10: It is important to mention that in the case of the Samarco’s dam collapse, board directors of Vale and BHP were included as defendants in a criminal proceeding regarding the accident. However, according to public information, the action was dismissed in respect of some of these directors because the judge considered that they did not have the power to influence the company’s management, so could not be regarded as having committed the crimes themselves. Furthermore, there is also an administrative proceeding before the Brazilian Securities Commission (CMV) to investigate any violation of the fiduciary duty of some of the board directors of Vale due to the Brumadinho dam collapse. There is no public information available regarding this proceeding.
11: Banco Central Do Brasi, Report on Social, Environmental and Climate-related Risks and Opportunities: Volume 1 (September 2021) <>.
12: Banco Central Do Brasi, New regulations on social, environmental, and climate-related risk disclosures (15 September 2021) <>; CMN Resolution No. 4,943; CMN Resolution No. 4,944;; BCB Resolution No. 139
13: CMN Resolution No. 4,945.