ESG+ Newsletter – 4 June 2026

Brazil eases ESG reporting mandate  

The Securities and Exchange Commission of Brazil (CVM) has amended Brazil’s sustainable finance framework, shifting sustainability reporting from mandatory to voluntary, ESG News reports. Mandatory reporting was introduced on 01 January 2026, with companies required to report on 2026 data under standards aligned with the International Sustainability Standards Board. However, following the revocation of this new law, companies can now opt in to publishing ISSB-compliant sustainability reports, although compliance with domestic standards issued by the Brazilian Sustainability Pronouncements Committee remains compulsory. The revised regulation creates a “comply-or-explain” system, whereby public companies that choose not to publish a sustainability report must explain that decision to the market. Brazil’s decision comes as other major markets revisit climate disclosure mandates, mirroring a loosening of reporting standards observed in the US, with ESG responsibility increasingly shifted toward boards, management teams, and investors. ESG News argues that the relinquishment of reporting requirements means companies must now decide whether transparency helps them access capital, manage risk, and build credibility. And that investors must decide how strongly they will reward voluntary disclosure.  

IFRS and GRI launch guidance on joint reporting

On 26 May 2026, the IFRS Foundation and the Global Reporting Initiative (GRI) jointly published a statement titled Facilitating Efficient Reporting when using the GRI and ISSB Standards. The statement builds on the Memorandum of Understanding signed between the two organizations in 2022 and the joint statement on interoperability issued in May 2024, reflecting a continued commitment to enabling a seamless, global, and comprehensive sustainability reporting system.

The document outlines how the GRI and ISSB Standards serve distinct but complementary purposes. GRI Standards provide stakeholders with material information about an entity’s impacts on the economy, environment and people, while ISSB Standards provide investors with information about sustainability-related risks and opportunities. It identifies common disclosures relevant to both frameworks, notes that IFRS S2 reporters can use the Greenhouse Gas Protocol to satisfy GRI 102 emissions requirements, and outlines ongoing collaboration across nature-related disclosures, sector standards, human capital, and labour-related standards, with the shared aim of reducing duplication and complexity for reporting entities.

With fragmentation and simplification remaining two ongoing discussions within the sustainability reporting landscape, this joint statement released from two of the most pivotal standard-setters perhaps signals that increasing integration, rather than increased fragmentation, can be expected going forward.

Sustainable fund flows return to positive territory, driven by rebound in Europe 

Global sustainable investment funds returned to positive net flows in Q1 2026, recording $3.5 billion in net inflows in the quarter. According to a recent article from ESG Today covering the quarterly Morningstar sustainable fund flows report, the net inflows in the quarter represent a rebound from the $27 billion in outflows recorded in the prior quarter. The recovery was driven primarily by European-domiciled funds, which attracted $9.1 billion in inflows, reversing an outflow of $16 billion in the quarter prior. Meanwhile, the United States extended its streak of outflows to 14 consecutive quarters, shedding $4.3 billion as investor sentiment remained pressured by political headwinds and continued sustainable fund liquidations. Despite the improved flow picture, total global sustainable fund assets declined approximately 10% to $3.51 trillion, weighed down by equity market volatility tied to global trade policy uncertainty and ongoing geopolitical conflicts. As Morningstar noted, ”the return to positive flows is an encouraging sign, but the broader asset decline reflects the challenging market environment facing sustainable investors.“ Together, these dynamics paint a cautiously optimistic picture for the sustainable investing landscape, which continues to be defined by regional divergence and ongoing macroeconomic headwinds.  

Governance becomes the leading ESG reputational risk in 2026

New research reported by ESGDIVE, based on a survey of 294 business leaders worldwide, points to a notable shift in ESG risk perceptions, with governance overtaking environmental issues as the leading source of reputational risk for organizations in 2026.  

Conducted between February and April 2026, the survey asked executives to rank the environmental, social and governance pillars of ESG according to the reputational risks they pose. Nearly half of respondents (45%) identified governance as the greatest threat, up significantly from 29% in 2024. By comparison, the proportion ranking environmental issues as the top risk fell from 39% to 27%, while social issues also declined, from 31% to 26%.  

The changing hierarchy reflects growing concern over corporate ethics and accountability, driven by rising regulatory expectations, intensified stakeholder scrutiny and a series of high-profile governance failures. Meanwhile, the lower ranking of environmental and social issues may indicate that many organisations view these risks as relatively more predictable or manageable in the near term.  

The findings underscore the need for a proactive and strategic approach to governance. Strong board oversight and executive leadership remain essential, supported by robust compliance frameworks, transparent stakeholder engagement, effective external communications and well-developed crisis response plans. Together, these measures can help organisations protect trust and strengthen resilience in the face of growing reputational challenges.  

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