BRAZIL Law and Practice Contributed by: Thaís Vasconcellos de Sá and Ana Julia Grein Moniz de Aragão, Bermudes Advogados
17. Transactions 17.1 Environmental Due Diligence
mandatory for the 2026 fiscal year. The new frame- work aligns Brazil with the ISSB’s global sustainabil- ity reporting structure, strengthens ESG transparency, and mitigates greenwashing risks. 16.4 Green Finance Brazil has shown strong commitment to expanding green and sustainable finance. The country has pro- gressively developed a range of instruments, including: • green, social and sustainability-linked bonds; • green loans; • investment funds; • sustainability credits; and • payment for environmental services (PES). Public development banks have taken the lead in this agenda. In 2024, the government launched Eco Invest Brasil in partnership with the Inter-American Develop- ment Bank (IDB) to attract international capital through blended finance and hedging mechanisms support- ing reforestation, clean energy and low-carbon infra- structure. Notably, the Brazilian Development Bank (BNDES) also plays a central role by issuing green bonds and financial bills, offering credit lines, and managing thematic funds such as the Amazon Fund and the Climate Fund. Private actors are also expanding their participation in green finance, driven by new sustainability disclosure requirements and governmental benefits. Financial institutions and companies have increased the issu- ance of green and sustainability-linked instruments and the structuring of blended finance operations aligned with international standards. For listed companies and entities supervised by the Securities and Exchange Commission (CVM), the accuracy of sustainability-related disclosures, green- washing and compliance with environmental and cli- mate reporting obligations are monitored directly by the authority. In other arrangements, monitoring obli- gations depend on contractual terms. The issuer or lender typically retains rights to verify compliance and may terminate or adjust contractual conditions in the event of non-compliance by the recipient of the funds.
Environmental due diligence is commonly conducted in M&A, finance and property transactions. In M&A and real estate deals in particular, pre-existing envi- ronmental liabilities or non-compliance may transfer to the buyer. To address this, environmental due dili- gence focuses on investigating environmental non- compliance and potential liabilities. In addition, sellers often provide representations, warranties and indem- nities covering environmental risks. 17.2 Disclosure of Environmental Information The seller is not expressly required to disclose envi- ronmental information. Nonetheless, given the strict approach to environmental liability in Brazil, buyers typically require sellers to provide representations and warranties regarding potential environmental risks and liabilities. Subject to the specific contractual terms, any omission or misrepresentation, reinforced by the principle of good faith under Brazilian law, may entitle the buyer to seek indemnification from the seller. 17.3 Key Issues in Environmental Due Diligence The most common environmental issues identified in due diligence include: • the absence of or non-compliance with environ- mental licences; • irregularities in waste management and effluent treatment; • contamination of soil and groundwater; and • potential liabilities arising from past activities. Depending on the sector, deforestation, interference with protected areas and non-compliance with envi- ronmental compensation or restoration obligations may also be relevant. Given Brazil’s strict liability regime, even historical or third-party environmental damage can result in joint and several liability for the buyer, making a detailed assessment of legacy risks a central aspect of trans- actional environmental due diligence.
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