Across finance, climate risk is moving from theory to practice - quietly reshaping how the system works.

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Kristian Ruth, Director of Sustainability at Finance Norway, sees this shift up close. Representing nearly all banks and insurers in the country, Finance Norway acts as the bridge between regulation and reality - translating EU directives, national expectations, and market signals into practical frameworks the industry can actually use.

“Everything in finance boils down to understanding and pricing risk,” Ruth says. “The only difference now is that climate risk changes what that risk looks like.”

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From backward-looking to forward-looking risk

For decades, banks have relied on historical data - default rates, credit histories, and stable assumptions about property values.

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Climate risk breaks that model.

“Traditional risk analysis looks backwards,” Ruth explains. “But climate risk forces you to look forwards - to think in scenarios, not averages.”

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It’s a fundamental shift in mindset. Floods and landslides don’t respect ten-year averages. Neither do new EU directives. Suddenly, lenders must consider what happens if - not just what happened before. That’s where new guidance from the European Banking Authority (EBA) comes in.

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Earlier this year, the EBA published expectations for how banks should integrate ESG risk into credit and capital assessments. Norway’s own Financial Supervisory Authority plans to follow suit.

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The result: sustainability has moved from being a communications issue to a solvency issue.

“This isn’t about being nice to the planet,” Ruth says. “It’s about financial stability. If you misprice risk, you misprice your entire portfolio.”

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The data gap - and the accountability problem

That’s easy to say - much harder to do. One of the biggest obstacles for Norwegian banks is the lack of reliable data. It’s been a legal requirement for large buildings to have an energy label since 2010, yet only around 20 percent of commercial buildings are actually registered.

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Banks want that data. Regulators expect it.But the enforcement body responsible for ensuring energy labels - NVE - has barely followed up the rule.

“It puts banks in a strange position,” Ruth says. “Finanstilsynet asks them, ‘Why don’t you have the data?’

And the banks reply, ‘Because no one’s enforcing the law.’”

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The result is an accountability gap: banks are being asked to quantify risks they legally have no authority to enforce.
So, they’re building their own infrastructure instead - testing proxies for energy performance, overlaying geospatial data on flood and landslide risk, and running stress tests to see how new regulations could affect asset values over time.

“We’ve gone from having almost no data,” he says, “to realising that we actually have too much - just in different silos. The job now is to connect it.”

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Where alignment happens

Behind the scenes, Finance Norway plays a quiet but pivotal role in that connection work. The organisation regularly brings together sustainability leads from the country’s largest banks to coordinate on ESG regulation and risk management.

In these working groups, members compare approaches, share lessons, and build a common understanding of what compliance and good practice should look like.

“It’s slow, technical work,” Ruth says. “But it’s how alignment happens.”

It’s also how the industry moves forward collectively - one shared spreadsheet, one clarified indicator, one agreed definition at a time.

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Physical risk meets financial logic

Ruth is quick to point out that Norway’s high insurance coverage makes physical climate risk more manageable than in many countries. The national natural disaster pool spreads the cost of floods and landslides across all insurers, keeping the market stable.

But that doesn’t mean the risks are trivial.

“We can’t build the same house in the same place three times and call it resilience,” he says.

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As extreme weather events like storm Hans & Amy becomes more frequent, the cost of recovery rises.

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Communities rebuild in the same high-risk zones because local governments have little incentive to say no.

“That’s where finance meets geography,” Ruth explains. “Insurers can’t carry that burden alone. Municipalities need better risk data, and banks need to understand the physical exposure of what they finance.”

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It’s a quiet but crucial alignment between private capital and public planning - one that will decide where Norway can safely build in the decades to come.

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The coming simplification

If 2024 was the year of new reporting frameworks, 2025 is the year of simplification. The EU’s Omnibus update aims to make the Corporate Sustainability Reporting Directive (CSRD) easier to apply, cutting complexity without diluting ambition.

EFRAG, the European body that drafted the standards, is reviewing what to keep and what to drop. Finance Norway supports the move.

“Nobody benefits from 100-page sustainability reports,” Ruth says. “What matters is that the information is consistent, comparable, and actually used.”

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The same principle drives the new voluntary SME standard - a lightweight framework for companies that aren’t formally required to report, but still want to disclose their sustainability profile. For banks, it could remove one of the biggest bottlenecks: the endless cycle of custom ESG questionnaires sent to smaller borrowers.

“We want reporting to become infrastructure,” Ruth says. “Something you can build decisions on, not just documents.”

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A system learning in real time

For Ruth, the biggest change isn’t regulation itself - it’s how quickly the sector is learning. Banks, insurers, and investors now share data, methodologies, and insights through Finance Norway.

They run joint projects with research institutes, coordinate workshops on physical risk modelling, and collaborate with the financial supervisor on ESG guidance.

“A few years ago, everyone was working in isolation,” Ruth says. “Now, we’re seeing real collaboration - and that’s how you build resilience.”

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This system-level learning is what makes Norway’s approach interesting to watch.

It’s pragmatic, data-driven, and quietly cooperative.

No slogans. Just methodical adaptation.

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What we see at Telescope

At Telescope, working with banks and public agencies, we see the same convergence in motion. Climate risk has moved from abstract reports to practical questions of exposure, regulation, and lending logic.

The challenge isn’t lack of intent - it’s the infrastructure of information. How do we make sure that flood maps, energy data, and risk models actually reach the decision-maker who signs a loan?

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That’s the bridge being built right now - between sustainability and solvency.

And it’s where new data infrastructure, like the kind Telescope helps develop, can turn insight into action.

Because when the financial system learns to price risk properly, it doesn’t just protect capital - it protects communities.

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