Public Consultation on the Brazilian Sustainable Taxonomy

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.