No one wanted to go first.

When Norwegian banks first discussed adding energy labels to their credit assessments, everyone agreed it made sense — but no one moved.

“It was a classic commons dilemma,” recalls Jørund Buen

^‍

“All the banks said they wanted to do it. But no one wanted to be the first.”

‍

That hesitation didn’t last. Today, most major Norwegian banks have begun asking new questions about their lending portfolios. How energy-efficient are the buildings they finance? Are they exposed to floods or landslides? Do borrowers have credible plans to improve performance over time?

For Jørund, it’s not about compliance. It’s about realism.

“Climate risk is credit risk,” he says. “If a building floods every time it rains, or has an F-rated energy label, that’s not a stable investment.”

At SpareBank 1 Sør-Norge, every loan above NOK 10 million now goes through a structured ESG review - a checklist that covers physical and transition risk, social factors, and governance.

For property loans, the process is concrete. Advisors log flood and landslide exposure, expected energy class, whether the property has active tenants, and what kind of improvements are planned. They look at what could affect value - not just today, but years from now.

“The goal isn’t to punish customers,” Jørund explains. “It’s to understand risk properly.”
‍

The dilemma: two ditches to avoid

Assessing climate risk isn’t a simple case of right or wrong. It’s a balancing act.

Push customers too early, and you risk straining projects that are still financially sound. Wait too long, and both the borrower and the bank could face sudden write-downs when new rules or market shifts take effect.

“We’re constantly trying to avoid the two ditches,” Jørund says.

‍

“On one side, you can be too strict - demanding early upgrades that might be cheaper or subsidised later. On the other, you can be too lenient - letting customers delay investments until it’s too late and the property loses value.”

He pauses for a moment, then adds:

“Sometimes it feels like we’re being asked to predict the future with a blindfold. But someone has to make the first move.”

‍

That uncertainty is what makes the job hard. The upcoming EU Buildings Energy Directive, for instance, could make it illegal to lease or sell the lowest-performing buildings. But no one knows exactly when or how those rules will hit Norway.

“You don’t want to push someone into a renovation they can’t afford,” Jørund says. “But you also don’t want them sitting on stranded assets in five years.”

‍

A shift in incentives

So far, the changes in lending terms have been gradual. Borrowers often expect big “green loan discounts”, but in reality, the difference between green and conventional financing remains modest.

That’s because the advantage starts at the source. Banks raise money from investors through green bonds, where the funding benefit is small. There’s little room to pass on large discounts.

‍

“We don’t have a huge pile of money sitting in a vault,” Jørund says with a smile. “When we offer green loans, we usually give up some of our own margin. We do it because we believe it reduces risk over time.”

‍

The bigger shift may come through what he calls the “brown penalties” - tighter pricing and shorter tenors for poorly performing properties with no improvement plan.

‍

“If you walk in with energy label G and no plan to upgrade, you’ll have a tough conversation,” he says. “But if you can show a path to C, that’s a different story. It shows you’re managing the risk, not ignoring it.”

‍

That shift - from reward to accountability - is reshaping the relationship between banks and borrowers. ESG data is no longer a feel-good metric. It’s a financial lever that directly affects access to capital.

‍

Seeing both risks at once

For Jørund, the real challenge is learning to see multiple risks at once - not just what is risky, but where.

“In a mountain municipality, the biggest threat might be landslides,” he explains. “Along the coast, it’s sea-level rise. In the cities, it’s the energy standard of the buildings themselves. You can’t use one model for all - you need a local lens.”

This is where the industry’s learning curve lies: combining transition risk (like tightening energy standards) with physical risk (like floods and landslides) into one coherent picture.

‍

It’s no longer theoretical. These are real variables that change the math of credit.

‍

From peer pressure to shared practice

The competitive dynamic that once held banks back is now pushing them forward.

After years of cautious observation, many lenders are aligning around similar expectations: energy label thresholds, physical risk checks, and documentation requirements.

‍

What started as peer pressure has evolved into peer learning.

“Everyone’s looking over each other’s shoulders,” Jørund says. “When one bank makes progress, it becomes easier for the next to follow. We’re slowly building a shared understanding of what good looks like.”

‍

The trend is clear: climate considerations are no longer an add-on. They’re becoming part of how credit is assessed, priced, and managed.

“Climate risk is credit risk - we just haven’t been pricing it properly yet.”

‍

What we see at Telescope

At Telescope, working closely with banks, we see the same shift happening in practice. Lenders are moving from broad, portfolio-level reporting to asset-level insight - connecting physical and transition risks to real decisions. The conversations through The Hubble - with leaders like Jørund - show how quickly the sector is maturing.

Banks aren’t waiting for perfect models. They’re experimenting, comparing, and learning together. The hard part isn’t identifying risk - it’s translating it into lending logic.

And that’s where the next wave of innovation will happen: using climate intelligence to make faster, fairer credit decisions that protect both people and portfolios.

‍

Because in the end, good banking and good climate risk management are the same thing: seeing the risk before it becomes a loss.

‍

Quick recap for lenders:

• Document address-level physical risk
• Show a credible energy improvement plan with cost and timeline.
• Treat ESG data as a risk lens, not a checkbox — it protects value for both lender and borrower.

‍