ESG reporting provides both challenges and unique opportunities for evolving economies. This year marks a turning point as Mexico and Brazil enact their own ESG legislation. Implementing mandatory ESG disclosure requirements will also have broader implications for these nations on the global stage, as ESG initiatives provide opportunities for innovation and economic development.
Mexico’s Reporting Standards
Mexico is the first emerging economy to mandate sustainability disclosures, aiming to build a strong national sustainability reporting foundation. Mexico’s Financial and Sustainability Reporting Standards Board published two sustainability standards, NIS A-1 and NIS B-1, as the first step of a larger plan to align with global reporting standards. The standards employ a dual framework, where NIS standards apply to private companies, and International Financial Reporting Standards (IFRS) S1 and S2 apply to public companies. Reporting begins in 2026 for the 2025 fiscal year, and although some exceptions are permitted in the first year of reporting, expectations will become increasingly rigorous.
For private companies, NIS A-1 establishes a conceptual framework for ESG reporting that aligns with the IFRS. NIS B-1 requires disclosure of 30 Basic Sustainability Indicators (IBSO) across ESG dimensions, including Scope 1, 2, and 3. It is important to note that there is no materiality assessment for these indicators, and companies must report on all 30 even if the value is zero. This creates a universal baseline for ESG data across Mexico. While there are no formal direct consequences for private companies that fail to report, non-compliance can lead to loss of business with major partners, restricted access to bank loans, and reputational damage.
For public companies, the Comisión Nacional Bancaria y de Valores (CNBV), Mexico’s securities regulator, has begun requiring all public securities issuers to report according to IFRS S1 and S2 standards. IFRS requires a separate sustainability report and a strict timeline for mandatory external assurance, starting in 2027, with reasonable assurance required by 2028 for FY 2027. This makes Mexico the first North American country to mandate reports for these global standards. The consequences for failure to comply include the inability to register securities or launch public offerings and cutting off access to capital markets.
Brazil’s Reporting Requirements
Brazil’s Securities and Exchange Commission (CVM) and Ministry of Finance have announced that public companies in Brazil will be required to report annual sustainability and climate-related disclosures beginning in 2026. These requirements will be modeled on the IFRS S1 and S2 standards. Publicly held companies, investment funds, and securitization organizations must report sustainability and climate-related financial information, including the climate-related risks and opportunities that may affect an organization’s operating revenue, capital costs, and access to capital. Companies will also need to disclose the internal procedures, controls, and governance structures that were implemented to monitor and manage climate-related risks and opportunities.
The new reporting requirements are part of Brazil’s Ecological Transformation Plan, a national strategy launched this year to drive the transition to a green economy. These efforts aim to modernize Brazil’s capital markets in line with global trends, fuel green economic growth and innovation, and improve transparency and resiliency.
Economic Implications of Widespread ESG Adoption
In the era of globalization, ESG standards are viewed as universally applicable mechanisms for transitioning towards a more sustainable and equitable global economy. With developed economies implementing ESG reporting requirements for domestic and foreign businesses, the economic incentive to comply has increased for countries doing business with these nations.
Emerging economies are beginning to pursue the financial benefits of ESG compliance, not only in trade negotiations but also in the innovation and efficiency that sustainability drives internally. The novel and evolving nature of the sustainability landscape provides emerging economies with opportunities to develop lucrative innovations in decarbonization, lean production, and emissions tracking, thereby stimulating their economies.
While developed economies were the first to move towards sustainable business and disclosure compliance, emerging nations are rapidly increasing their own ESG initiatives. This global shift provides developing countries with opportunities for innovation, economic gain, and global recognition. As sustainable economic and political regulations advance, emerging economies have the choice to capitalize on the potential benefits or risk falling behind.