NORWAY Law and Practice Contributed by: Ida Marie Windrup, Magnus Tønseth, Markus Nilssen and Daniel Jovanovic, BAHR
1.6 ESG/Sustainability-Linked Lending Norway’s ESG-linked and sustainability loan mar- ket, which had flourished for numerous years, still accounts for a meaningful slice (roughly 25–30%) of new corporate loans in early 2025. Many lenders continue to insist on ESG or sustainability compo- nents as part of borrowers’ “licence to operate”, but margin benefits appear limited, and some companies find that the compliance burden outweighs cost sav- ings. Nonetheless, regulators (including the Norwe- gian Financial Supervisory Authority) have hinted at tougher disclosure requirements, potentially bringing further impetus for ESG financing structures in late 2025 or 2026. Projects in real estate and maritime/ aquaculture remain prime sectors for these lending solutions The Norwegian legal market closely follows the development in the UK and in Europe with regards to format, with Norwegian banks adopting the sustain- ability-link rider wording developed by the LMA. Nor- wegian banks are also developing their own frame- works based on LMA principles, such as green loans where a certain percentage of revenue stems from a “green” activity, service or product. Examples include real estate and aquaculture. With the growth of large-scale infrastructure projects in Norway fuelled by energy transition and emergence of new and capital-intensive industries, project financ- ing is set to play a key role going forward. 2. Authorisation 2.1 Providing Financing to a Company The provision of financing (including loans and guar- antees) is a regulated activity in Norway, and lenders looking to provide financing to Norwegian companies will, as a starting point, need to be licensed or pass- ported as either an EEA-based credit institution under Directive 2013/36/EU (CRD IV) or a European long- term investment fund under Regulation (EU) 2015/760 (ELTIF). However, loans provided entirely on a Norwe- gian borrower’s initiative, without the relevant lender having marketed or recommended the loan to the bor- rower prior to the borrower’s decision to initiate the transaction, may constitute reverse solicitation and
ing from non-regulated entities (with exceptions as described in 2.1 Providing Financing to a Company and 3. Structuring and Documentation ). 1.5 Banking and Finance Techniques Historically, much of the high-volume leveraged or non-investment grade lending in the Norwegian mar- ket has been made within capital intensive, asset- backed industry sectors such as shipping and offshore services. Such lending has entailed the financing of expensive assets, which require a capital-efficient structure. A common structure in recent years has been based on the LMA standard super senior bank and senior secured bond, where in some instances the bank tranche has ranked pari passu with the bond tranche. BAHR acted as Norwegian lead counsel to the lenders on the first bank/TLB facilities combined with Norwegian bonds, under a common terms agree- ment. The authors expect appetite to grow for more of these creative and bespoke financing structures in the years to come, where the Norwegian bond market complements other capital markets. The introduction of EU-harmonised securitisation rules paves the way for risk-sharing transactions where investors may co-invest with banks in individual credits or pools of credits. The authors expect this market to grow in Norway over the coming years. Preferred equity is used extensively, particularly in private equity transactions or in connection with more structured credit. For example, this can be used where several investors are participating in a project but one of the creditors has a regulatory requirement to structure its investment differently from the others. In work-out situations or outright restructurings, issu- ance of new subordinated capital has often been used instead of equity instruments in order to create a lay- ered capital structure. This may include zero coupon bonds with interest payments akin to that of dividend distributions. Hybrid debt instruments with perpetual tenor have also been used in some instances, to cre- ate debt instruments which, for accounting purposes, can count as equity in the balance sheet. Although green and sustainability-linked features remain frequently used, their popularity has not bounced back to 2021–2022 highs.
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