Resolution CMN No. 4327 — Guidelines for Establishing and Implementing the Socio-Environmental Responsibility Policy by Financial Institutions

The Central Bank of Brazil, in accordance with Article 9 of Law No. 4,595 of December 31, 1964, makes public that the National Monetary Council, in a session held on April 24, 2014, based on the provisions of Articles 4, items VI and VIII, of the aforementioned Law, Article 2, item VI, and Article 9 of Law No. 4,728 of July 14, 1965, Article 20, § 1, of Law No. 4,864 of November 29, 1965, Article 7 of Law No. 6,099 of September 12, 1974, Article 1, item II, of Law No. 10,194 of February 14, 2001, Article 1, § 1, and Article 12, item V, of Complementary Law No. 130 of April 17, 2009, and Article 6 of Decree-Law No. 759 of August 12, 1969,

R E S O L V E S:

CHAPTER I

OBJECT AND SCOPE OF APPLICATION

Art. 1. This Resolution sets forth the guidelines, considering the principles of relevance and proportionality, that must be observed in the establishment and implementation of the Socio-Environmental Responsibility Policy (PRSA) by financial institutions and other institutions authorized to operate by the Central Bank of Brazil.

Sole Paragraph. For the purposes of establishing and implementing the PRSA, the institutions referred to in the caput must observe the following principles:

I - relevance: the degree of exposure to socio-environmental risk of the institution's activities and operations; and

II - proportionality: the compatibility of the PRSA with the nature of the institution and with the complexity of its activities and its financial services and products.

CHAPTER II

SOCIO-ENVIRONMENTAL RESPONSIBILITY POLICY

Art. 2. The PRSA must contain principles and guidelines that steer socio-environmental actions in business and in the relationship with stakeholders.

§ 1. For the purposes of the provision in the caput, stakeholders are the clients and users of the products and services offered by the institution, the community internal to its organization, and other persons who, according to the institution's assessment, are impacted by its activities.

§ 2. The PRSA must establish guidelines on strategic actions related to its governance, including for the purposes of socio-environmental risk management.

§ 3. The institutions mentioned in Art. 1 must encourage the participation of stakeholders in the process of elaborating the policy to be established.

§ 4. The establishment of a PRSA is admitted by:

I - financial conglomerates; and

II - credit cooperative systems, including the central credit cooperative, and, if applicable, its confederation and cooperative bank.

§ 5. The PRSA must be subject to evaluation every five years by the executive board and, if applicable, the board of directors.

CHAPTER III

GOVERNANCE

Art. 3. The institutions mentioned in Art. 1 must maintain a governance structure compatible with their size, the nature of their business, the complexity of services and products offered, as well as with the activities, processes, and systems adopted, to ensure compliance with the guidelines and objectives of the PRSA.

§ 1. The governance structure mentioned in the caput must provide conditions for the exercise of the following activities:

I - implement actions within the scope of the PRSA;

II - monitor compliance with the actions established in the PRSA;

III - evaluate the effectiveness of implemented actions;

IV - verify the adequacy of the socio-environmental risk management established in the PRSA; and

V - identify any deficiencies in the implementation of actions.

§ 2. The establishment of a socio-environmental responsibility committee, of a consultative nature, linked to the board of directors or, if none exists, to the executive board, is permitted, with the responsibility to monitor and evaluate the PRSA, and may propose improvements.

§ 3. In the event of the establishment of the committee referred to in § 2, the institution must disclose its composition, including in the case where it is integrated by a stakeholder external to the institution.

CHAPTER IV

SOCIO-ENVIRONMENTAL RISK MANAGEMENT

Art. 4. For the purposes of this Resolution, socio-environmental risk is defined as the possibility of occurrence of losses by the institutions mentioned in Art. 1 resulting from socio-environmental damages.

Art. 5. Socio-environmental risk must be identified by the institutions mentioned in Art. 1 as a component of the various types of risk to which they are exposed.

Art. 6. The management of socio-environmental risk by the institutions mentioned in Art. 1 must consider:

I - systems, routines, and procedures that enable the identification, classification, assessment, monitoring, mitigation, and control of socio-environmental risk present in the institution's activities and operations;

II - recording of data regarding actual losses due to socio-environmental damages, for a minimum period of five years, including values, type, location, and economic sector of the operation;

III - prior assessment of potential negative socio-environmental impacts of new types of products and services, including regarding reputational risk; and

IV - procedures for adapting socio-environmental risk management to legal, regulatory, and market changes.

Art. 7. Actions related to socio-environmental risk management must be subordinate to a risk management unit of the institution.

Sole Paragraph. Independent of the requirement provided in the caput, procedures for identification, classification, assessment, monitoring, mitigation, and control of socio-environmental risk may also be adopted in other risk management structures of the institution.

Art. 8. The institutions mentioned in Art. 1 must establish specific criteria and mechanisms for risk assessment when carrying out operations related to economic activities with a higher potential to cause socio-environmental damages.

CHAPTER V

FINAL PROVISIONS

Art. 9. The institutions mentioned in Art. 1 must establish an action plan aimed at the implementation of the PRSA.

Sole Paragraph. The plan mentioned in the caput must define the actions required for the adaptation of the institution's organizational and operational structure, if necessary, as well as the routines and procedures to be executed in accordance with the policy guidelines, according to a schedule specified by the institution.

Art. 10. The PRSA and the respective action plan mentioned in Art. 9 must be approved by the executive board and, if applicable, by the board of directors, ensuring adequate integration with the institution's other policies, such as credit, human resources management, and risk management.

Art. 11. The institutions mentioned in Art. 1 must approve the PRSA and the respective action plan, in the manner provided in Art. 10, and begin execution of the actions corresponding to the action plan according to the following schedule:

I - by February 28, 2015, by institutions required to implement the Internal Capital Adequacy Assessment Process (ICAAP), in accordance with current regulation; and

II - by July 31, 2015, by other institutions.

Art. 12. The institutions mentioned in Art. 1 must:

I - designate a director responsible for compliance with the PRSA;

II - formalize the PRSA and ensure its internal and external dissemination; and

III - keep documentation related to the PRSA available to the Central Bank of Brazil.

Art. 13. The Central Bank of Brazil may determine the adoption of controls and procedures related to the PRSA, establishing a deadline for its implementation.

Art. 14. This Resolution enters into force on the date of its publication.

Alexandre Antonio Tombini
President of the Central Bank of Brazil