ROSEMARY IMOBHIO 
Brazil was on track to make history. As recently as 2023, the country’s Securities and Exchange Commission, the Comissão de Valores Mobiliários (CVM), had positioned Brazil as the first major emerging economy to legally enforce mandatory sustainability reporting aligned with the International Sustainability Standards Board (ISSB). That milestone, set for fiscal year 2026, attracted global attention. Now, with the publication of Resolution CVM 244, the mandate is gone.
In its place stands a “comply-or-explain” framework. It is voluntary in design but structured in accountability. The shift sends a signal far beyond São Paulo’s financial district. From Lagos to Nairobi, regulators and businesses are watching closely. They are asking whether Brazil’s recalibration signals a new path for emerging markets or reflects a broader global retreat from strict ESG disclosure.
Brazil Retreats from Mandatory Sustainability Reporting
Resolution CVM 193, published in October 2023, marked a major milestone. It aligned Brazilian capital markets with IFRS S1 and IFRS S2. These are the core pillars of the ISSB framework covering sustainability and climate-related financial disclosures.
Under the original plan, listed companies would undergo voluntary reporting in 2024 and 2025. Mandatory compliance was then expected to begin for fiscal years starting on or after January 1, 2026.
However, Resolution CVM 244 dismantled that mandatory structure. It removed the legal requirement for publicly held companies to prepare and file sustainability reports. At the same time, it retained the ISSB-aligned framework for companies that choose to report.
Those that proceed must still follow standards developed by Brazil’s Sustainability Pronouncements Committee (CBPS), which are grounded in IFRS S1 and IFRS S2.
What has changed is not the reporting standard. Instead, it is the obligation to comply. Companies that spent years building ESG systems, governance structures, and data pipelines are no longer required by law to publish their results.
Why Regulators Changed Course
The CVM explained that the revised approach aims to improve voluntary adoption while preserving transparency and comparability. At the same time, it seeks to restore flexibility for companies in assessing the costs and benefits of disclosure.
This reflects a long-standing global tension in ESG regulation. Large multinational companies often have ESG teams, data systems, and assurance providers in place. As a result, they can manage mandatory reporting requirements with relative ease.
Mid-tier companies face a different reality. Data collection systems, third-party audits, climate modelling, and internal restructuring all carry significant costs. For some firms, these expenses directly affect capital allocation decisions.
In Brazil, market consultations reportedly revealed strong pushback from mid-sized issuers. Their concerns were not about transparency itself. Instead, they reflected operational limitations that regulators in Europe, the United States, and Latin America are increasingly acknowledging.
Otto Lobo, Interim President of the CVM, described the shift as part of broader institutional modernization. He noted the regulator’s focus on agility, predictability, and sustainable finance advancement.
Importantly, this policy change should not be interpreted as a retreat from sustainability goals. Instead, it signals a recalibration of implementation speed and regulatory design.
The Rise of the Comply-or-Explain Model
Resolution CVM 244 introduces a structured voluntary system rather than a complete withdrawal of oversight.
First, companies that voluntarily adopt ISSB-aligned reporting must maintain disclosures for at least three consecutive fiscal years. This prevents selective or opportunistic reporting cycles.
Second, companies that choose to stop reporting after starting must issue a formal public announcement in the fiscal year before they exit the framework. This ensures investors are not surprised by sudden disclosure gaps.
Third, from 2027, any listed company that opts out of sustainability reporting must publicly explain its decision when filing annual financial statements.
Together, these rules shift accountability from enforcement to transparency. The effectiveness of this approach will depend on how consistently companies comply and how markets respond.
A Global Pushback Against ESG Mandates
Brazil’s decision does not stand alone. Across major economies, ESG frameworks are undergoing significant recalibration.
In the United States, the Securities and Exchange Commission moved in 2025 to halt defense of its climate disclosure rules in court. The regulation, originally finalised in 2024, faced legal challenges and political resistance. By 2026, the SEC had moved toward rescinding the framework entirely, citing legal and statutory concerns.
In Europe, the Corporate Sustainability Reporting Directive remains in force. However, the Omnibus I package, adopted in early 2026, narrowed its scope. It raised thresholds for reporting and exempted many SMEs. It also made several sector-specific standards voluntary, citing competitiveness and administrative burden concerns.
Taken together, these shifts point to a broader global adjustment. Policymakers are increasingly questioning whether mandatory ESG regimes outpaced the capacity of companies and the willingness of regulators to enforce them.
What Nigeria Can Learn from Brazil
Nigeria is at a critical stage in its ESG development. The Securities and Exchange Commission has signaled alignment with ISSB standards. The NGX introduced enhanced ESG disclosure requirements in 2024. The Central Bank of Nigeria has also integrated ESG considerations into banking supervision frameworks.
However, coordination across institutions remains fragmented.
Brazil offers several lessons.
First, sequencing matters. Capacity building must precede enforcement. Even Brazil’s two-year transition period proved challenging for mid-tier firms. Nigeria’s corporate reporting environment is still developing, which makes phased implementation essential.
Second, regulatory fragmentation creates inefficiency. Multiple Nigerian agencies currently issue overlapping ESG guidance. A unified framework would reduce confusion and improve compliance quality.
Third, the comply-or-explain model may offer a balanced approach. It preserves transparency while allowing flexibility for firms with limited capacity. Investors still receive explanations, even when full reports are not produced.
Finally, SME capacity cannot be ignored. Many Nigerian listed companies lack the systems required for full ISSB-aligned reporting. Without tailored support, strict mandates risk future rollback.
Implications for ESG Reporting in Africa
Brazil’s decision carries wider implications for African capital markets. It reinforces that mandatory ESG reporting is difficult to sustain without strong underlying corporate infrastructure.
Exchanges such as the Johannesburg Stock Exchange and the Nairobi Securities Exchange have advanced ESG frameworks further than Nigeria. However, even these systems largely rely on guidance rather than strict enforcement.
For investors, especially development finance institutions such as the African Development Bank and the IFC, the key concern is not whether reporting is mandatory. The priority is whether disclosures are credible, consistent, and comparable.
A well-designed comply-or-explain system can support this goal. Poorly enforced mandatory systems may fail to deliver reliable data.
Multinational companies operating in Africa will continue ESG reporting due to home-country requirements. However, domestic firms need proportionate frameworks that reflect local capacity.
At the same time, financial institutions are increasingly embedding ESG risk into lending decisions. This means that even voluntary systems create real financial incentives for disclosure.
The biggest risk lies in pure voluntarism without safeguards. Historically, this leads to ESG reporting being concentrated among large firms, while mid-sized companies remain outside the system. Nigeria should avoid this imbalance.
Conclusion
Brazil’s shift from mandatory to voluntary ISSB-aligned reporting is not a reversal of sustainability ambition. Instead, it reflects a practical recognition that disclosure quality depends on institutional readiness.
When regulation moves faster than capacity, it risks producing compliance in form rather than substance.
For Nigeria and Africa, the lesson is not to reject mandates entirely. The lesson is to build the foundations first. Regulatory alignment, institutional coordination, and corporate capacity must come before enforcement.
Brazil’s comply-or-explain model is therefore not an endpoint. It is an intermediate step that attempts to balance flexibility with accountability.
As global ESG standards continue to evolve, with ISSB adoption expanding, Europe recalibrating its frameworks, and the United States stepping back, emerging markets face a clear challenge.
Their advantage will not come from the strictness of their rules. It will come from how clearly, consistently, and credibly those rules are designed and implemented.
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