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Norwegian Legal Update, Summer 2021 – ESG Compliance

Over the last couple of years, there has been an increasing focus on environmental, social and governance (ESG) compliance among stakeholders in the Norwegian market. The topic has risen high on the agenda of the Norwegian authorities as well as larger businesses, investors and financial institutions. While formal ESG-reporting and due diligence requirements have so far been voluntary for most companies in Norway, there is now a clear shift from soft law to hard law.

What is to come: new ESG reporting requirements
Norway introduced legislation presenting social reporting requirements already in 2013 through the introduction of section 3-3 of the Norwegian Accounting Act in anticipation of the Non-Financial Reporting Directive 2014/95 (NFRD). However, the increased need for more accurate reporting related to climate-related issues, such as climate risk and carbon neutrality, is a key reason why the EU – and Norway – are now tightening up ESG reporting requirements.

On June 4 2021, the Norwegian government submitted a legislative proposal for the Sustainable Finance Act to Parliament that will imply implementation of Regulation (EU) 2019/2088 on Sustainable Finance Disclosure (SFDR) and the EU Taxonomy. Implementation in Norwegian law will take place once incorporated into the European Economic Area (EEA) Agreement, which is expected to happen in short time.

Additionally, effective from July 1 2021, section 3-3 of the Norwegian Accounting Act was slightly modified. In addition to the key ESG factors; human rights, employee rights, social conditions, external environment and combatting of corruption, the factors gender and non-discrimination have been added.

In context of also social and governance issues, the Norwegian parliament has recently passed a new Transparency Act that regulates enterprise transparency and work regarding basic human rights and decent working conditions.

In sum, by introduction of both the new Sustainable Finance Act and the Transparency Act as well as other ESG legislative initiatives in Norway, future reporting requirements have been legally formalised and strengthened. Consequently, financial institutions as well as other businesses operating in Norway should prepare for more comprehensive and detailed reporting requirements on sustainability and climate risk, as well as social and governance issues.

For a thorough overview of current and future ESG reporting and due diligence requirements under Norwegian laws read also the full ESG Compliance report written by @Malin Tønseth and @Frode Berntsen which was published by IFLR on June 21, 2021.