Oslo's financiers are taking cues from Brussels as European Union taxonomy rules on sustainable activities are set to become effective from next January.
The Taxonomy Climate Delegate Act — unveiled by the European Commission in April — aims to help investors determine whether an economic activity can combat climate change.
Being part of the European Economic Area, Norway is expected to introduce the classification system into domestic laws within this year.
Harald Solberg, chief executive of the Norwegian Shipowners’ Association, expects future reporting on environmental, social and governance (ESG) matters in the Oslo capital market to centre around the taxonomy rules.
“We will see a standard reporting format on ESG information in a not too distant future,” Solberg said. “We welcome this development.
“More standardised reporting will make it easier for ESG financiers, investors and other stakeholder to compare companies, and it will give the ESG frontrunners an advantage.”
More than 200 sustainability disclosure initiatives have currently co-existed across various sectors, and companies seeking ESG financing often have trouble finding the one most suitable.
Time to agree priorities
“There is a need to establish truly global standards for ESG reporting, where each sector may have specific data disclosure requirements,” advisory firm Governance Group managing partner Kristian Andersen said. “Currently, there are too many ‘standards’ in the market.”
His company’s view is that disclosures should be relevant to various stakeholders and decision makers in shipping rather than overly comprehensive.
“There are many important ESG topics, but not everything can be material,” Andersen said. “Collecting data is time-consuming … Hence, the number of ESG reporting parameters should be limited.
“Many are still struggling to go from treating ESG disclosures as box-ticking to making informed ESG priorities based on thorough materiality.
“For companies seeking ESG financing, tick-box reporting is of little value. Sustainability priorities must be integrated in the business case.”
But the EU taxonomy in principle disqualifies any asset “dedicated to transport of fossil fuels” from being labelled as “sustainable”.
European regulators have also deemed shipping as a “transition activity” towards a zero-carbon future, so shipowners might not be affected by the disqualifier.
Still, if strictly interpreted, the taxonomy could prevent oil and gas tanker owners from securing green and sustainability-linked financing.
DNB Bank’s global shipping chief Christos Tsakonas said the new regulation should be seen as “a goal for the industry” rather than “a framework for transition”.
“A very small share of vessels qualify as green under the EU taxonomy for the time being,” Tsakonas said. “The industry still needs capital, now.”
