Corporate Governance Codes in Brazil

Introduction

Climate change and nature loss pose significant material, systemic and financial risks to companies and financial institutions. Managing and mitigating these risks, while working towards the net zero transition, also presents opportunities for businesses to increase resilience, drive value and ensure they are future fit.

This brief provides an overview of the principles and provisions in the Brazilian Corporate Governance Code that allow for climate and nature-related action.

This brief is part of the Corporate Climate Governance Navigator that shares best practice, standards and guidelines in corporate climate governance for board directors across the world, including mandated requirements at jurisdictional level. The actions proposed draw on international frameworks including the OECD’s Principles on Corporate Governance and Climate Change and Corporate Governance Report, the IFC’s Climate Governance Approach, and the Principles for Effective Climate Governance developed by the World Economic Forum, which form the foundation of the Climate Governance Initiative’s (CGI) work. This country brief can be reviewed alongside the Directors’ Duties Navigator where board directors will find further guidance on the Brazilian legal and regulatory landscape regarding climate change and nature loss.  

About the Brazilian Corporate Governance Code 

The Brazilian Corporate Governance Code – Listed Companies (Brazilian Code) was issued by Grupo de Trabalho Interagentes (GT Interagentes) in 2016, a coalition coordinated by the Brazilian Institute of Corporate Governance (Instituto Brasileiro de Governança Corporativa - IBGC) and comprised of 11 entities related to the capital market. For the structure of the Brazilian Corporate Governance Code – Listed Companies, the “apply or explain” approach of the ABRASCA Code for Self-Regulation and Good Practices of Listed Companies was used. The content, principles and recommendations came from the fifth edition of the Code of Best Practices of Corporate Governance (IBGC Code), issued by IBGC in 2015. The Brazilian Code is a combination of those previous codes. In 2017, it was included in the regulation issued by the Brazilian Securities and Exchange Commission (CVM) that requires annual reporting on the compliance with the 54 practices recommended by the code. 

IBGC has updated its own code in 2023. Although its adoption is entirely voluntary by all types of organizations, not only listed companies, the IBGC Code remains as a national reference for aspirational and educational goals. The sixth edition follows a principles-based approach, ensuring its applicability across diverse organizations while integrating environmental and social considerations into decision-making. This latest revision was developed through extensive stakeholder consultation, including experts, company representatives, regulatory bodies, and international organizations, as well as benchmarking with foreign codes.

Principles and provisions in the Brazilian and IBGC Code that support climate and nature action 

The table below highlights relevant board-level action including questions to ask in the boardroom relating to the climate and nature provisions of the Brazilian Code. These are grouped to align with the six parameters of IFC’s Climate Governance Approach and the eight Principles for Effective Climate Governance published by the World Economic Forum.
 

The above table highlights provisions in the Brazilian Code that allow boards to take practical steps to advance climate and nature-related engagement and action. The proposed steps and questions can be used as a starting point to gradually strengthen the board’s engagement in these areas. The tone set at the top of the organisation is of great importance to the culture of the whole organisation, and boards are uniquely positioned to drive positive action on climate change and nature loss through the lens of corporate purpose and strategy.  

Best practice examples of international frameworks for corporate governance on climate and nature

• The OECD Principles on Corporate Governance (2023) support policy makers to evaluate and improve the legal, regulatory, and institutional framework for corporate governance. They also provide guidance for stock exchanges, investors, corporations, and others that have a role in the process of developing good corporate governance. The Climate Change and Corporate Governance Report provides an overview of main trends and issues related to the implications of climate change for corporate action. 
• International Finance Corporation has developed the IFC’s Climate Governance Approach: The IFC Climate Governance tip sheet: Equipping Corporate Boards to Mitigate Climate Risks and Seize Climate Opportunities presents the business case for climate governance and offers guidance to assist Board directors in identifying and overseeing climate-related risks and opportunities. The tip sheet provides advice on incorporating climate into strategy deliberations and identifying, monitoring, and responding to climate-related issues. The IFC Climate Governance Progression Matrix helps test and assess your boards’ maturity when it comes to Climate Governance and support board directors in identifying and overseeing climate-related risks and opportunities. It provides practical and progressive climate-related actions for each of the six parameters of the IFC Corporate Governance Approach: Commitment, Board Structure and Function, Control Environment, Disclosure and Transparency, Minority Shareholder Treatment and Governance of Stakeholder Engagement. 
• The Principles for Effective Climate Governance published by the World Economic Forum (2023) help you, as a board director, to holistically address climate opportunities and risks, and align global climate goals with the organisation’s purpose, values and long-term prosperity. It provides an overview of global climate policy, science and economics, an overview of trends related to regulation and disclosure, and points at implications for corporate boards. It provides 8 guiding principles for effective climate governance on corporate boards.
• The Directors’ Duties Navigator: Climate Risk and Sustainability Disclosure issued by the Climate Governance Initiative (2024) supports directors to make informed decisions and understand their legal duties regarding how to manage that risk and understand the broader climate-related regulatory landscape in which they operate. The Navigator provides information on over 30 jurisdictions on the following topics: Government and regulatory approaches to climate change, Sustainability and climate-related disclosure requirements, Liability risks for companies and directors and practical tips for directors.