DRSAC Implementation Brings Deep-Seated Changes to Brazilian Bank Operations

Back in 2021, the Banco Central do Brasil (BCB) began the implementation of its Documento de Riscos Social, Ambiental e Climático (DRSAC)—with the aim of advancing the nation’s sustainability agenda and helping mitigate the impacts of climate change in Brazil. The document outlines regulatory reporting standards which require financial institutions to disclose exposure to social, environmental, and climate risks. 

The DRSAC seeks to track risk at multiple levels, ranging from whole sectors to individual clients and specific credit operations. It mandates institutions to collect and analyze data on various risks, including those connected to environmental degradation and climate change.

Disclosures come in the form of a semi-annual report on key qualitative and quantitative concerning risk exposure, together with details on various counterparties. The goal is to enable a deeper grasp of how exposure to environmental risk impacts an institution's overall financial health. 
 

Based on the recommendations of the Taskforce on Climate-Related Financial Disclosures (TCFD), the BCB’s DRSAC helps institutions assess the likelihood of event-driven losses caused by exposure to the following risk dimensions: 

1. Social Risk: The violation of fundamental rights or acts harmful to the common interest, including harassment, discrimination, or prejudice based on personal attributes.
2. Environmental Risk: The degradation of the environment (deforestation, animal cruelty, etc.).
3. Climate Risk: The transition risks from adapting to low-carbon regulations and physical risks from increasingly frequent and severe weather events like floods, droughts, and wildfires due to climate change.
    

DRSAC reporting, which must be filed twice a year, is mandatory for all financial institutions licensed by Brazil’s Central Bank.  As part of the rollout, regulatory in-force dates varied by segment, based on the total exposure of an institution in relation to Brazilian GDP: 

The BCB and other regulators—such as Comissão de Valores Mobiliários, the Brazilian counterpart to the SEC—continues to review and establish new practices and rules for these institutions.  
 

DRSAC impacts every financial institution that BCB licenses. No aspect of a bank—investments, data collection, technology, risk and credibility reporting, reconciliation and climate-risk models—goes untouched from a technical perspective. Given this, it makes sense to craft efficient, holistic organizational processes around data sourcing and strategy, rather than addressing regulations in silos. 

With that in mind, consider a comprehensive solution which: 

• Incorporates ESG data from different internal and external sources.
• Performs data-quality checks and adjustments on ESG risk ratings, as needed.
• Delivers an intuitive UI that allows a clear view into the final report for trend, variance, and other analytics.
• Enables workflow automation for the issuance of management reports that support strategic ESG and business decisions.
• Provides reconciliation capabilities and implementation, including multiple reporting solutions, direct mapping from SCR transactions (IPOCs), or COSIF accounts to the DRSAC report. 

Because the disclosure requirements of DRSAC have many synergies with those of other regulations such as the EU’s EBA Pillar 3, taking a strategic approach can simplify reporting. A singular platform to manage ESG regulations is almost always an effective way to help mitigate these challenges.
 

Multiple jurisdictions around the globe use Nasdaq’s solutions for navigating ESG regulation. Find out how to get trusted support with integrating data across different frameworks, perform relevant KPI calculations and implement robust end-to-end ESG reporting.

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