Public Consultation On The Brazilian Sustainable Taxonomy – Climate Change

Brazil’s Ministry of Finance has initiated a public
consultation on the Brazilian Sustainable Taxonomy (TSB), a
fundamental instrument for classifying and defining the
compatibility of economic activities and investments with
sustainability and climate-change mitigation objectives. In
addition to acting as a “vocabulary” for investors
committed to sustainable practices, the TSB plays a crucial role in
Brazil’s Ecological Transformation Plan (PTE), directing
financial resources to sectors aligned with the Sustainable
Development Goals (SDGs).

The first stage of this public consultation addresses the method
for selecting economic activities considered sustainable, including
the criteria for mitigating environmental impacts and sustainable
land use. Gender and racial equity indicators will also be
assessed, an innovation of the TSB aimed at integrating social
inclusion policies into the definition of sustainable economic
activities. This index will take into account regional and
territorial characteristics, reflecting Brazil’s socioeconomic
diversity. In addition, the Monitoring, Reporting and Verification
(MRV) system, which aims to monitor the flow of capital allocated
to activities classified as sustainable, and the Minimum Safeguards
(MS) proposal, with its cross-cutting guidelines, will be available
for public review. This first stage of the public consultation will
remain open until January 31, 2025.

On February 1, the public consultation will advance to its
second stage, which will end on March 31, 2025. At this stage,
selected technical criteria for mitigating and adapting to climate
change, specific safeguards and detailed information for each
sector will be presented. The definition of these technical
parameters will represent a refinement in the application of the
TSB, establishing quantitative standards for mitigating
environmental impacts and defining safeguards that consider the
particularities of each sector.

The TSB is intended to ensure that investors, both domestic and
foreign, know how to classify products or operations as sustainable
when considering investments in Brazil. It also should help
investors identify sustainable practices for reporting purposes and
to access specific financing, such as lines of credit or debt
issuance. The TSB also provides guidelines for efficient practices
in areas such as energy and land use.

With the TSB’s implementation, Brazil will join the ranks of
entities that have adopted a framework to guide the green economy,
such as the European Union, which uses a similar system. The TSB,
however, will be tailored to the environmental and socioeconomic
specificities of Brazil, with the aim of tackling the climate
crisis and reducing systemic inequalities.

The Environmental, Climate Change and ESG Practice of Tauil
& Chequer Advogados in association with Mayer Brown is
available to provide further clarification on the subject.

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