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In time, investors realised that it might very well have financial benefits as well. It turned out, though, that everyone involved had wildly differing perceptions of what it really meant – and thus began the work of standardising concepts and criteria, both in the financial industry and in public auhorities.

With increasing public interest there was also a need to standardise reporting. This applies firstly to the companies' own reporting. As with so many other international regulations, the EU is leading the way in legislation, and it is starting to get quite complex.

For some years now, we have had NFRD – the Non-Financial Reporting Directive. This directive sets requirements for reporting beyond the strictly financial disclosures. In 2017, the European Commission issued more detailed guidelines for publishing information on the environment and social conditions. These are admittedly not mandatory, but they have nevertheless contributed to some degree of standardised reporting.

Two years later, we got supplementary guidelines for climate-related information. And in April this year, the European Commission adopted a sustainability reporting draft called CSRD – Corporate Sustainability Reporting Directive. This extends the reporting requirement to all large companies, corporate group leaders and listed companies except the very smallest (turnover below 700,000 euros or balance sheet total below 350,000 euros).

Our entire industry is working intensely to adapt to rules that nobody yet knows completely.

The purpose is to provide clearer instructions on reporting, but specific rules will first be outlined by the independent organisation European Financial Reporting Advisory Group (EFRAG). This is a project in progress, like so much of the regulations here. In addition, it will probably take at least three years before everything is implemented.

This affects the information we receive as asset managers. In addition, new requirements are imposed on the information that we in turn report to our investors and unitholders.

In our previous report, I mentioned SFDR, an acronym for the Sustainable Finance Disclosure Regulation – a regulation concerning the publication of information on sustainability in financial products. The goal is to direct capital flows towards more sustainable investments with lower climate emissions. The regulation has already entered into force in the EU and it is on its way into Norwegian legislation through a draft that has been subject to consultation.

The Norwegian law will also capture another mainstay in the EU sustainability efforts – the EU taxonomy, i.e. the classification system that will help clarify what is really sustainable and what is not.

But these are essentially overarching principles. Here, too, the specifics have yet to be carved out. In the EU, the taxonomy is being expanded with social principles, while detailed rules for publishing sustainability information in mutual funds will not be in place until next summer.

As the regulations eventually enter into force in the EU, they will probably also be incorporated into Norwegian law in the form of regulations. In due time.

Bewildered? Well, yes, it's complicated. Our entire industry is working intensely to adapt to rules that nobody yet knows completely. It is a kind of shooting at running targets, with no real agreement on which targets apply and what to shoot with.

You can read a little about our own hunting in this report. We learn something every day and can obviously still get better. In any case, we are convinced that this is a valuable hunt, both for Pareto Asset Management and for the entire industry.

Responsible investments report

This article is an introduction to our report on responsible investments no. 2-2021. Read the complete report here.