[co-author: Rodrigo Demoro]
On October 31, 2025, the Federal Government published Decree No. 12,705/2025, which, on the eve of COP30, officially established the Brazilian Sustainable Taxonomy (TSB) as an instrument of the Federal Executive’s Ecological Transformation Plan.
Under the decree, the TSB’s strategic objective is to reduce information asymmetries and promote the integrity of the sustainable finance market, while ensuring interoperability with international standards. From an environmental standpoint, the TSB aims to support climate change mitigation and adaptation, biodiversity and water resource conservation, pollution prevention and control, and the transition to a circular economy.
The decree positions the TSB as a federal public policy instrument, with purposes that include:
- Directing credit lines, guarantees, and incentives;
- Labeling and structuring credit instruments and operations;
- Monitoring investments according to their degree of alignment with the TSB; and
- Promoting international cooperation in sustainable finance.
The TSB framework is organized into three levels of assessment, based on measurable technical criteria that consider: (i) the extent to which an activity contributes to environmental and/or social objectives; (ii) the absence of significant harm to other objectives; and (iii) compliance with minimum safeguards. Activities that do not directly generate positive environmental impacts but are essential to enabling mitigation, adaptation, conservation, circularity, or a just transition may be classified as “enabling activities," provided they meet applicable technical and safeguard requirements.
The minimum safeguards operate as mandatory cross-cutting conditions for any eligibility within the TSB, encompassing environmental, social, and governance dimensions. Compliance with these safeguards is an essential prerequisite for classification, regardless of the technical performance of the activity in relation to the specific objectives.
The new decree serves as a foundational framework for the TSB, which is complemented by sectoral and thematic technical handbooks that have already been published. These documents will define criteria, thresholds, and methodologies for the practical application of the TSB, aimed at guiding sustainable investments and integrating Brazil into global best practices in green finance.
This measure represents an institutional milestone in the context of COP30, reinforcing Brazil’s commitment to transparency, standardization, and credibility in sustainable finance policies.
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