Brazil Social, Environmental and Climate Responsibility Policy: Brazil requires financial institutions to implement a Social, Environmental and Climate Responsibility Policy (PRSAC)

What’s Required

1) Establish a formal PRSAC, proportionate to risk exposure
Institutions in segments S1–S5 must establish PRSAC and implement effective actions. The rule explicitly requires proportionality to:

• business model, nature of operations, and complexity of products and processes

• magnitude and materiality of exposure to social, environmental, and climate-related risks (as defined in related CMN risk governance frameworks)

2) Define PRSAC content as principles and guidelines, and apply it to stakeholder relationships
PRSAC is defined as the set of principles and guidelines on social, environmental, and climate issues to be observed in business, activities, processes, and stakeholder relationships. This is not merely a public statement; it is intended to drive operational behavior, underwriting/credit decisions (where relevant), and client engagement.

3) Governance: assign accountable leadership and ensure board oversight
Key governance requirements include:

• appointment of a director with responsibilities connected to PRSAC governance (for applicable segments and group structures)

• board competences to approve and revise PRSAC, ensure adherence, ensure integration with other policies (credit, HR, risk/capital, compliance), and correct deficiencies promptly

4) Committee structures and coordination with risk governance
The resolution provides for a social, environmental, and climate responsibility committee and requires coordination with the risk committee to facilitate information exchange, while permitting role assignment to another committee if conflicts of interest are avoided and coordination requirements are respected. This pushes institutions toward integrated sustainability risk governance rather than siloed ESG functions.

5) Review cycle and trigger events
PRSAC must be reviewed at least once every three years or upon relevant events, including material new products/services or material changes in activities. Institutions must therefore implement a change-management trigger process tied to product governance and strategic planning.

6) Group-level application
For prudential conglomerates, PRSAC and actions can be unified, but must consider issues at the conglomerate and member-institution level; responsibilities and notification requirements apply for identifying which entity is accountable to the Central Bank.

Important Deadlines

• Adoption: 15 September 2021 (CMN Resolution 4,945/2021).

• Entry into force: operationally applicable upon publication, with ongoing governance and periodic review obligations (review at least every three years).

• Review cadence: at least once every 3 years, or earlier upon relevant trigger events.

Current Status

In force as a core prudential governance obligation for sustainability and climate risk responsibility across the regulated financial sector.

Penalties for Non-Compliance

CMN Resolution 4,945/2021 is a prudential compliance obligation. Supervisory consequences typically arise through Central Bank examinations and enforcement actions where failures are identified, including:

• formal supervisory findings requiring remediation plans

• potential administrative sanctions under applicable financial supervision powers when governance is absent, materially deficient, or misrepresented
  In practice, the most material risk is that PRSAC failures translate into broader findings on risk management adequacy, internal controls, and governance, which can have knock-on effects on capital planning, product permissions, and management accountability.

Examples of Known Violations

Typical governance breakdowns that supervisors flag under PRSAC-style regimes:

• Paper-only PRSAC: policy exists but is not integrated into credit/underwriting, procurement, product approval, or client onboarding, resulting in operational decisions contradicting stated principles.

• No defined accountability: director responsibilities not documented; unclear escalation lines; committee not established where required, or not coordinated with the risk committee.

• No proportionality rationale: institutions cannot explain how PRSAC is “adequate tothe magnitude and materiality” of exposures, leading to findings that controls are insufficient.

• Stale policies: failure to review within the three-year cycle or after a material product/business change.

• Incentives misalignment: compensation structures incentivize behavior inconsistent with PRSAC, a specific board responsibility item.

Resources

• https://www.bcb.gov.br/content/financialstability/Brazilian_Prudential_Financial_Regulation_Docs/ResolutionCMN4945.pdf