NORWAY Trends and Developments Contributed by: Peter Hammerich, Sebastian Seeger and Didrik Krohg, BAHR
the country’s largest private equity manager. However, there is heightened momentum towards sustainable and ESG-driven investments. As specific gas energy activities have now been included in the list of environ - mentally sustainable economic activities covered by the EU Taxonomy, investors have started reassessing opportunities in this field. The Norwegian government has been outspoken in prioritising the implementation of EU rules on sus - tainability-related disclosures in the financial services sector, notably through implementing the Sustaina - ble Finance Disclosure Regulation (SFDR), which has applied since 1 January 2023 (almost two years later than in the EU; see “Legislative developments and delays” above). Challenges of the “Green Shift” ESG and the shift towards more “green” investments give rise to several commercial and legal challenges for private equity sponsors. A commercial challenge exists in that there is a tendency for “green” assets to be comparatively more expensive. As private equity managers seek to meet sustainability targets, they may drive up the price of “green” assets while putting downward pressure on less sustainable assets. This dynamic could complicate portfolio strategies and calls for a careful approach to deal sourcing, valua - tion and investor communications. From a legal point of view, the “green shift” requires managers to implement appropriate written internal policies and procedures, document relevant aspects of the investment process (including ESG due dili - gence) and ensure that mandatory disclosures and regular reporting to both investors and the regulator are in place. In particular, managers who seek to offer sustainable products aligned with the SFDR and EU Taxonomy will need to ensure that fund documenta - tion and the actual investment process keep up with dynamic rules. In the authors’ experience, the green shift is increas - ingly impacting not only private equity funds and managers but also portfolio companies. On the one hand, funds and fund managers request information and increasingly concrete measures from their port - folios, in order that they comply with their obligations
under the SFDR, the EU Taxonomy Regulation and their numerous delegated regulations and guidelines. Additionally, newly emerging regulations directly tar - get portfolio companies, such as: • the Corporate Sustainability Reporting Directive (CSRD), adopted by the Norwegian Parliament in June 2024, which will gradually mandate sustain - ability reporting by companies; and • the Corporate Sustainability Due Diligence Direc - tive (CS3D), which entered into force in the EU at the end of July 2024 and is also expected to ultimately be implemented in Norway. Focus on (Undue) Fees Historically, Norwegian regulators – like those through - out Europe – have been preoccupied with “closet indexing” in the mutual fund sector, targeting man - agers who claim to be actively managing portfolios but, in fact, closely mirror established indices. This scrutiny is now broadening to include private equity, particularly in light of renewed European Securities and Markets Authority (ESMA) guidelines aimed at preventing excessive fees, especially when managers do not provide the operational improvements or alpha they claim. Ensuring transparent fee structures and documented value-creation steps can help sponsors avoid regulatory or reputational setbacks. Recently, the Norwegian regulator introduced market - ing fees for non-Norwegian funds, which include a one-time registration fee and an annual fee levied to maintain the fund’s registration for marketing in Nor - way. While these fees are relatively low, ranging from NOK5,000 to NOK20,000 per fund, ensuring swift payment is important, as the authors have observed significant delays related to delayed payment of the registration fee. Pensions and Private Equity In Norway, institutional investors – particularly insur - ance companies – are a crucial source of capital for private equity sponsors. These insurers must comply with the EU Solvency II rules, which tie their capi - tal requirements to the perceived risk of the assets they hold. Even though the EU encourages the use of private equity to meet insurers’ long-term liabilities,
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