Diversity on the Brazilian Capital Markets: B3 Heading to the Future

By: The WFE Focus Team Nov 2023

Diversity on the Brazilian Capital Markets: B3 Heading to the Future

In 2022, B3, the Brazilian Stock Exchange, proposed substantial changes to its listing rules, which included the creation of an annex to the Issuers’ Regulation regarding environment, social, and corporate governance (”ESG”) measures (“ESG Annex”), aiming to align it to recent regulatory changes, in Brazil and other countries, relating to ESG aspects and to address a diversity and inclusion gap in the management of Brazilian listed companies.

For example, a survey conducted in 2023 by B3 based on public data revealed that, among Brazilian listed companies, 55% and 36% reported not having a single woman in officer (C-level) and board of directors positions, respectively.

Furthermore, 98% and 95% reported not having black people in officer and board positions, respectively.

After an analysis of international practices on the subject, B3 elaborated the ESG Annex proposal and conducted a public hearing process, whereby market players and other stakeholders submitted their contributions. Upon adjustments on the initial proposal, the ESG Annex was approved by the Brazilian Securities and Exchange Commission on 07/14/2023 and came into effect on 08/19/2023.

B3 intends to promote an effective change in the management of listed companies. In that sense, the ESG Annex has an adaptation timeframe that reaches 2025 and 2026, to allow the companies a period of reflection about their practices.

Internacional Research

Prior to the preparation of the ESG Annex, B3 noticed a trend in the international markets to implement ESG practices, especially focused on diversity aspects in stock exchange regulations and rules related to capital markets, for example, the regulatory amendments made by the Financial Conduct Authority (“FCA”), Nasdaq Stock Market (“Nasdaq”); Australian Securities Exchange (“ASX”); Hong Kong Exchanges and Clearing Market (“HKEx”); Tokyo Stock Exchange, Inc. (“TSE”); and Singapore Exchange (“SGX”).

As a common point among all the rules researched, it was noted the aim to promote gender diversity in boards and senior management positions by establishing goals for the inclusion of women by the regulatory authority or by the issuer.

In that way, Nasdaq, FCA and ASX – the latter in relation to S&P/ASX 300 Index companies – establish specific goals for the inclusion of women in management positions, while TSE, HKEx and SGX allow the issuer to establish goals to promote gender diversity in management.

In addition, some exchanges have also addressed diversity in other areas, such as race and ethnicity, nationality, and sexual orientation.

Comply or Explain

Most of the rules researched incorporate the “comply or explain” model – Nasdaq, FCA, TSE and ASX – which requires the issuer to present evidence of compliance with the practice described in the rule or, in case of non-adoption or partial adoption of the practice, indicate the corresponding explanation.

The ESG Annex shall also be applied on a “comply or explain” basis. In addition to gradually engaging issuers in the D&I agenda, this model also preserves transparency and allows access to information on corporate governance so that investors and other stakeholders may engage in dialogue with the issuer’s senior management on ESG matters, and take the information provided into account for their investment decision-making.


Regarding the scope of applicability of the new rules, B3 considered that, given the importance of the ESG agenda, it should be extended to all listed companies.

Therefore, the ESG Annex was included in the Issuers’ Regulation, which is applicable to all companies listed on B3, with no distinction between listing segments and different levels of corporate governance.

  • Structure

The ESG Annex contains three (3) ESG Measures that shall be implemented by the listed companies, on a comply-or-explain basis, which is organized in two (2) sections: (1) Board and Senior Management Structure; and (2) Company Documents.

  • Measure 1: Diversity

The first section consists in electing as effective member of the board of directors or of the officers at least one (1) woman and a (1) member of an underrepresented minority.

For ESG Annex purposes, a woman is understood as any person who self-identifies as female, regardless of the sex assigned to her at birth, while as an underrepresented minority is considered as person (a) “black”, “brown” or “indigenous”; (b) who self-identifies as part of the LGBTQIA+ community; or (c) who is considered a disabled person under the Brazilian Law. B3 reinforces that the right to privacy shall be preserved in any circumstances, and the verification of the criteria will occur through self-declaration.

Also, the definition of “underrepresented minority” considers the characteristics of the Brazilian society, in the same way that Nasdaq and FCA rules reflect United States and United Kingdom scenarios, respectively.

  • Measure 2: Nomination of the management bodies

The second section refers to the establishment, in the Bylaws or in the nomination policy, of a procedure for the nomination of members of the board of directors and officers, including at least the following criteria: (i) similariity of experiences; and (ii) diversity in gender, sexual orientation, color or race, age, and inclusion of disabled people.

A nomination procedure that covers these criteria enables the company to commit more effectively to working on diversity issues in the structure of its management bodies.

This measure encourages the issuers to seek a good professional considering the implementation of diversity and inclusion targets.

  • Measure 3: Management compensation

The last measure of ESG Annex is related to the company's management compensation. It is established that, when there is variable compensation of members of the board of directors or officers, the company shall define in compensation practice or policy the performance indicators relating to ESG topics or targets (not necessarily connected to diversity).

In this regard, B3 understands that it will encourage discussions about this topic on the local market, and companies will be able to define targets that may bring concrete benefits to its’ ESG initiatives.

  • Conclusion

B3 reinforces, through the ESG Annex, its role in inducing good corporate governance practices, as well as its commitment to promoting diversity and inclusion among Brazilian companies.

The ESG Annex was the first step of a more tangible effort to the promotion on diversity in the Brazilian capital market, and the future will show its results!


The views, thoughts and opinions contained in this Focus article belong solely to the author and do not necessarily reflect the WFE’s policy position on the issue, or the WFE’s views or opinions.