The terms are divided into the following three categories, each with their own requirements for the allocation of the fund's investments:
- transition-, social- and governance-related terms,
- environmental- or impact-related terms, and
- sustainability-related terms.
The guidelines provide examples of terms within each category but do not contain an exhaustive list of relevant terms.
All funds with terms within these categories in their name must allocate at least 80% of their investments to obtain the environmental or social characteristics (SFDR Article 8) or sustainable investment objectives (SFDR Article 9) as disclosed in the pre-contractual information to be provided in the form of templates published in annexes to the level 2 rules of SFDR (Annex II for Article 8 funds and Annex III for Article 9 funds).
Furthermore, the guidelines require funds with terms within these categories in their names to follow exclusion criteria set out in the level 2 rules of the EU Benchmark Regulation, e.g., excluding companies involved in tobacco production or activities related to controversial weapons. For funds with environmental, sustainability, or impact-related terms in their name, certain exclusion criteria related to companies generating revenue from fossil fuels etc. also apply.
Managers of impact funds should especially note that the guidelines will require funds using "impact"-related terms in their name to ensure that the investments used to meet the 80% threshold are "made with the objective to generate a positive and measurable social or environmental impact alongside a financial return". This criterion is aligned with the Global Impact Investing Network's (GIIN) definition of "impact investments", which is also referred to in NorNAB's newly published Norwegian guide in impact investments (available on request through this page).
The guidelines will apply in the EU starting three months after they have been translated into the EU's official languages. The legal bases for the guidelines (i.e., new provisions in the AIFMD and the UCITS Directive) have not yet been transposed into Norwegian law and the timing of such implementation is unknown, making it uncertain when the guidelines will be applicable in Norway. The guidelines will nonetheless be applicable to all Norwegian fund managers marketing their funds within the EU.
Proposal for the Norwegian implementation of the CSRD
On 15 March, the Ministry of Finance published its proposal for the Norwegian implementation of the EU Corporate Sustainability Reporting Directive (CSRD). While no official date has been set for when the Norwegian amendment act will be adopted, many anticipate that the Parliament will pass the act this summer.
The amendments introduced through the CSRD will require all EU/EEA listed and non-listed large undertakings and listed small- and medium-sized enterprises to publish comprehensive annual sustainability reports, and obtain external assurance opinions of the repots.
The scope of companies subject to sustainability reporting requirements will expand over the course of several years, and the first group of companies must report in 2025 for the financial year that began on, or begins after, 1 January 2024. The Norwegian Ministry of Finance has explicitly stated that it aims for the Norwegian implementation to be effectuated with the same timing as in EU member states.
The CSRD sets out the following timeline for the entry into force of reporting requirements:
- From 1 January 2024, with reporting in 2025: Companies with more than 500 employees that are public-interest entities, meaning banks, insurance companies, and companies that have issued transferable securities such as shares and bonds that are traded on a regulated market in an EU/EEA state (including third-country issuers), and which have a balance sheet total of more than NOK 280 million and/or net turnover of more than NOK 560 million. The same applies to public-interest entities that are parent companies in a group that on a consolidated basis exceeds the same thresholds.
- From 1 January 2025, with reporting in 2026: All large undertakings, which are companies exceeding at least two of the following three thresholds: (a) a balance sheet total of NOK 290 million, (b) net turnover of NOK 580 million, and (c) an average of 250 employees during the financial year, as well as parent companies to a large group that meets the same criteria.
- From 1 January 2026, with reporting in 2027: Listed small and medium-sized enterprises (SMEs), small and non-complex institutions, captive insurance undertakings, and captive reinsurance undertakings. For the SMEs, there will be an "opt-out" option until the financial year 2028, so that the first mandatory reporting is due in 2029.
More information on the CSRD is available in Thommessen's newsletter through this link.
Regulation on ESG rating activities close to adoption
On 24 April, the European Parliament adopted the Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities (ESGR). An ESG rating is an assessment of a company's or financial instrument's sustainability profile, in terms of the company's or instrument's performance on environmental, social, and governance factors as measured according to the specific rating's methodology.
The ESGR will subject ESG rating providers to authorisation requirements, a range of disclosure and operational requirements, as well as a sanction regime. Ratings providers will, among other things, be required to provide certain information on their websites and additional information to users of their ratings and the entities they assess, including the methodology they use, the purpose of the rating, and any weighting of E, S, and G factors if an aggregated score is provided. Providers will also be subject to various rules on organization, including certain general principles for their operations. Other operational rules include limitations on engaging in other activities (such as providing consulting services to investors or entities) unless such activities are sufficiently separated, restrictions on outsourcing, rules for managing conflicts of interest, knowledge and competence requirements for employees, and the requirement to establish a complaint handling mechanism.
The methodology itself for producing an EAG rating will however not be regulated – providers will still have freedom in determining their proprietary methods.
The Council’s approval the ESGR and its publication in the EU Official Journal remain before the ESGR is formally adopted.
The above has been prepared by Thommessen for information purposes only. It should not be construed as legal advice. For more information please contact Eyolf Aarø or Ingrid Solum.
