Sustainability & ESG

The purpose of an Environmental, Social and Governance (ESG) strategy is to ensure that you have a clear plan for how to operate in a sustainable and responsible manner, where not only financial performance but also the impact on the society and the environment is considered in a thorough manner.

Having a clearly defined ESG strategy is essential to define and achieve your sustainability goals. Furthermore, it adds value and will be a valuable tool for navigating the increasingly complex sustainability landscape.

We can help you to develop an ESG strategy tailored to your business and needs.

The number of regulatory initiatives related to sustainability and ESG has increased dramatically in recent years, and the tidal wave of regulation is likely to continue for some time. Having a clear and comprehensive overview of current and future regulatory requirements that affect your business, your services and products is therefore crucial. As legislation in this area often applies beyond the company itself, also considering the wider supply chain and other stakeholders, it is important to look beyond national requirements and also have a view to other jurisdictions.

We can help you:

• identify and comply with relevant current requirements, like providing correct information to authorities and end customers, as well as ensuring you have included necessary requirements in contracts with suppliers, and manufacturers;
• prepare for upcoming regulations and requirements, to avoid being caught off guard by the rapidly evolving regulatory landscape.

The EU Taxonomy Regulation is a classification system that defines what constitutes sustainable economic activities for investment purposes for a number of sectors. Together with other regulations in this field, the taxonomy is intended to help channel the flow of capital in a greener direction by making it easier for investors to invest in projects and companies that contribute to the green transition.  Both non-financial companies of a certain size and financial institutions are required to report on the proportion of their activities and investments that fulfil the criteria in the taxonomy. 

To be sustainable or Taxonomy-aligned, the economic activity in question must firstly promote at least one of the EU's six environmental objectives:

• climate change mitigation
• climate change adaptation
• sustainable use and protection of water and marine resources
• transition to a circular economy
• pollution prevention and control, and
• protection and restoration of biodiversity and ecosystems.

Secondly, the economic activity must not significantly harm any of the other five environmental objectives. Finally, it must fulfil certain minimum social and governance safeguards. The minimum safeguards relate to how companies work to

• secure human rights for their own workforce and in their value chains
• combat corruption, and
• ensure they adhere to fair taxation and fair competition practices.

The EU Taxonomy became part of Norwegian law from 1 January 2023. For the financial year 2023, Norwegian non-financial companies must report on the extent to which they engage in activities that are Taxonomy-aligned, while Norwegian financial institutions must report on the extent to which they finance or have invested in such activities.  

We can help you:

• ensure that your Taxonomy reporting is based on a sound methodology which takes into account relevant guidelines and best practices. This is particularly relevant in relation to the minimum safeguard requirements, which are often overlooked in the reporting process;
• understand how the Taxonomy relates to other sustainability related regulations, helping you coordinate and streamline your reporting efforts and avoid having to do the same work twice.

The Corporate Sustainability Reporting Directive (CSRD) is a new EU directive that requires certain companies to publish information on how they address a wide range of sustainability-related issues. The directive introduces far more detailed reporting requirements than the current Norwegian rules on corporate social responsibility reporting. Covered entities must report on how their operations and strategy affect their sustainability performance, and how external sustainability-related factors (such as climate change and human rights) affect their activities. The purpose of the directive is to facilitate a more sustainable economy, in line with the EU Green Deal and the UN Sustainable Development Goals, by providing investors and other stakeholders with access to standardised and detailed information on the sustainability profile of companies. 

The reporting requirements initially affect large companies and companies listed on the stock exchange, but the number of entities covered will be expanded over time. 

It is expected that CSRD will become part of Norwegian law, and that Norway will follow the same timeline for the introduction of the requirements as in the EU. 

It is therefore advisable to start preparing for the new reporting regime as early as possible, so that you are equipped to meet the new requirements when they come into force in Norway.

We can help you:

• identify relevant reporting requirements for your business;
• ensure that the report is prepared in accordance with current standards and regulations;
• provide quality assurance as to the methodology used.

The Transparency Act, which entered into force on 1 July 2022, aims to promote respect for fundamental human rights and decent working conditions by businesses. In order to achieve this goal, the Act requires companies that supply goods and services in Norway to carry out due diligence assessments to determine whether their own operations or their supply chain pose a risk of - or have led to - negative impacts on human rights and working conditions. On 30 June each year, companies subject to the Transparency Act must publish the results of their due diligence assessments on their website. The Act also obliges companies to answer questions from anyone about how the company is managing actual and potential negative impacts on fundamental human rights and labour conditions.

We can help you:

• comply with all processes and requirements set out in the Transparency Act and can contribute with practical experience from a wide range of companies and industries;
• prepare ethical guidelines for your own organisation and suppliers;
• implementation of practical and adapted processes to comply with the requirements of the Transparency Act;
• perform risk assessments of suppliers or supplier groups;
• design and implement mitigating measures;
• develop procedures for handling of information requests;
• prepare necessary reports.

ESG due diligence assesses a company's alignment with binding national and international ESG regulations such as the Transparency Act, EU Taxonomy, CSRD, environmental regulations, human rights, trade compliance and anti-corruption regulations. The due diligence includes a mapping of legal ESG risks that the target company is exposed to, an assessment of whether these risks have been adequately addressed by the company, as well as our recommendation on how to best mitigate any gaps that are identified in the process.

Safeguarding the external environment and social considerations has long been legitimate and encouraged in public procurement processes, and practice shows that there are a number of challenges associated with managing/implementing such considerations in a good (and legal) manner, and to meet and exceed the expectations. Climate and sustainability requirements and considerations are an integral part of public procurement, and can be seen in qualification, award criteria, and contract requirements. From 1 January 2024, a new general rule stating that the environment must be weighted at least 30% when awarding public contracts, shows that suppliers must be prepared to showcase and highlight the environmental benefits inherent in their performance in order to be equipped to win public contracts.

Increasing numbers of investors and portfolio managers are committing to ESG principles, while at the same time, the risk of being accused of greenwashing is ever present. Regulators are tackling this issue through legislation such as the Sustainable Finance Disclosure Regulation (SFDR), which requires fund and asset managers to disclose a significant amount of new information, including how they consider sustainability risks in their investment processes and products, and how they deal with principal adverse impacts of their investment decisions on sustainability factors.

We can help you:

• identify gaps between the current and target state of reporting compliance with the SFDR;
• review and update documents with SFDR requirements and SFDR-specific language, including website entity and product disclosures, pre-contractual disclosures and more;
• review all supporting materials to ensure SFDR compliance related to the pre-investment process, for instance by reviewing contractors’ responses to due diligence questions;
• with recommendations and approaches for training and practical implementation of SFDR requirements in the investment process.

Sustainable finance is a form of debt funding for investments that are tied to ESG initiatives. There is a correlation between the risk adjusted return of those investments and their sustainability practices or outcomes. There are several sustainable finance instruments already available, including bonds, loans, debt-for-nature swaps, and blended finance. In 2022, the sustainable finance market was valued at USD 4.2 trillion, and it is projected to grow to USD 30.9 trillion by 2032.

Benefits of sustainable finance include reputational benefits for borrowers/issuers, the ability to attract a larger investor base and access to dedicated ESG-segments of the financial market. For lenders, having credible green or sustainability-linked loans on their books will in turn help improve their Green Asset Ratio and make reporting obligations, such as those imposed by the EU Taxonomy, easier to comply with.

We can help you:

• draft provisions for green and sustainability-linked loans and bonds to ensure these reflect both client needs and market standard practice, while avoiding greenwashing, and are able to draw upon extensive knowledge from our international finance practice.
• review existing green and sustainable investment frameworks in light of new regulatory demands, such as the EU Green Bond Standard as well as existing standards such as ICMA's Green and Sustainability-Linked Bond Principles and the LMA's Green and Sustainability-Linked Loan Principles.

We can assist you in meeting minimum ESG tax safeguards, as well as in developing  a tax risk management solution tailored to your needs.

We can assist you in establishing and implementing an ESG tax strategy, tax policies and other governing documents, and by this ensure that you get an ESG aligned tax risk management structure in place