On July 20, B3 released a new version of the Issuers Regulation approved by the securities and exchange commission (CVM), which will come into force on August 19, 2023. Its Annex B – ESG Measures (ESG Annex) sets new requirements to foster gender diversity and the representation of under-represented groups in leadership positions of listed companies, as well as providing transparency in relation to ESG indicators bound to shareholder remuneration.

The mechanism adopted by B3 will be “practice and explain”, whereby the company must provide transparency to the market about the actions adopted when filling in its Reference Form, or explain the reasons for not adopting a specific rule.

The changes are as follows:

Diversity in management bodies

The rule defines that listed companies should elect as a full member of the Board of Directors or the Statutory Board:

• One woman (thus understood as any person who identifies with the female gender, despite the sex assigned at birth)
• One (1) member from an under-represented community, understood as any person who is:

(a) “Black”, “brown” or “indigenous”, according to the classification presented by the IBGE (Brazilian Institute of Geography and Statistics);

(b) A member of the LGBTQIA+ community; or,

(c) A person with disability, under the terms of Law 13.146/2015.

Deadline for implementation:

• Companies already listed will have until 2025 to meet at least one of the requirements, and until 2026 to meet both requirements.
• Companies that are listed after the publication of the new regulation will have until the deadline for updating the reference form for the year following their listing to comply with one of the requirements, and until the deadline for updating the reference form for the second year following their listing to comply with both requirements.
• The deadline for SPACs to meet the requirements above will run from the date of the combination of business with the target company, rather than from its listing date.

Changes to the Bylaws or Nomination Policy

Listed companies must establish ESG requirements for the appointment of members of the Board of Directors or Statutory Management in their Bylaws or Nomination Policy.

The requirements should, at a minimum, consider criteria of complementary experience and diversity (gender, sexual orientation, color, race, age group and inclusion).

Deadline:

• This measure must be implemented by the year 2025 by companies already listed; and,
• By the deadline for updating the reference form for the following year for companies listed after the rule.

Changes to the variable remuneration of directors

If the company adopts variable remuneration criteria for directors, it must establish performance indicators based on ESG themes or targets in the remuneration policy or similar document.

This measure must be implemented by the year 2025 for companies already listed, and by the deadline for updating the reference form for the following year for companies that come to be listed after the rule.

In June of this year, B3 carried out a survey using data from the reference forms of 343 listed companies, and found that the companies’ Boards of Directors and Executive Boards had low levels of diversity and inclusion, which justifies the measure taken.

The recent measures point out to the relevance that B3 and CVM are attaching to the issues of diversity and inclusion in leadership positions in listed companies. This places Brazil in a prominent position compared to other countries in this very important context in the ESG dimension.