Annual Report 2024

The EU’s Corporate Sustainability Reporting Directive (CSRD) entered into force in the EU on 31 July, 2023. Based on current legislation, Kommunalbanken AS (KBN) will be required to produce a sustainability statement with effect from the 2025 reporting year, with its first mandatory statement produced in 2026. In 2024, KBN decided to adapt the sustainability reporting to the European Sustainability Reporting Standards (ESRS). KBN’s 2024 statement will not achieve full compliance with the standards, meaning its 2024 sustainability statement will be a transitional statement. This statement covers the 2024 accounting year and has the same reporting period as KBN’s financial report in accordance with the IFRS accounting standards, except for specified exceptions.

On 26 February, 2025, the European Commission announced proposed simplifications to the CSRD, the “Omnibus” proposal. If the proposed simplifications are adopted in the EU and subsequently implemented into Norwegian law, KBN will no longer be required to report according to the CSRD.

Kommunalbanken AS has no subsidiaries and is not part of a group. This statement covers the company's value chain, including its upstream and downstream value chains, and KBN’s own activities. In this transitional statement, KBN’s downstream value chain has been defined as one step away from the customer in the double materiality analysis process, meaning that the investment projects of KBN’s customers are included in KBN’s assessment. Underlying suppliers to customers’ investment projects are not included. KBN’s definition of its value chain will be re-evaluated when more companies from the financial industry have reported, and a practice is established for how companies in the financial industry define their value chains.

KBN’s publication of the sustainability statement for 2024 is voluntary. KBN has previously used the Global Reporting Initiative (GRI) when preparing its sustainability reports. With effect from the 2024 reporting year, however, KBN has decided not to follow GRI, but instead to follow the principles and requirements set out in ESRS 1 and ESRS 2. This has resulted in the following, inter alia:

• Stakeholders have been identified, and KBN’s value chain has been mapped in accordance with the principles and requirements in ESRS 1.
• A double materiality analysis (DMA) was carried out in accordance with the principles and requirements in ESRS 1.

• The Board of Directors, Audit Committee and management team have been involved in the DMA process to a greater extent.

• The structure and requirements in the ESRS have been used in KBN’s preparation of its sustainability statement.
• The statement uses the forward-looking time horizons described in ESRS 1:
  • Short-term horizon, up to and including the end of the 2025 reporting year,
  • Medium-term horizon, up to 5 years from the end of the 2025 reporting year,
  • A long-term time horizon, longer than 5 years from the end of the 2025 reporting year.

KBN performs calculations as part of its greenhouse gas accounting. As KBN has fewer than 750 employees, the scope 1, 2 and 3 greenhouse gas emissions may be omitted, as well as total GHG emissions for the first reporting year. This means that KBN will not be required to report these before the 2026 reporting year, i.e. to be reported in 2027. KBN has ongoing processes to produce a best estimate of the scope 3 category 15 greenhouse gas emissions. For further information, please see section E1 Climate Change.

No material errors from prior periods have been identified and corrected in the reporting year. In cases where there have been changes to the principles used for the preparation of information, the reader will be made aware of this.

KBN reports in accordance with Pillar 3 requirements and publishes information on the company’s risk profile and capitalisation, as well as on governance and risk controls. This statement is available on KBN’s website.

In addition, KBN produces an overview of which activities it considers sustainable according to the requirements of the EU Taxonomy for Sustainable Activities. This overview is included in the climate change chapter in accordance with the structure requirements in ESRS 1.

KBN also reports in accordance with the Norwegian Transparency Act and produces a separate report pursuant to the Equality and Anti-Discrimination Act on work on equality at KBN. These reports are available on KBN’s website.

KBN uses the Task Force on Climate-related Financial Disclosures (TCFD) framework to assess climate risks. KBN’s TCFD report is published on its website in connection with its publication of its Annual Report.

KBN’s governance structure is described in the Corporate Governance section of its Annual Report. A description of the aspect of its governance structure that is relevant to KBN’s sustainability reporting is provided below.

The management team was involved throughout the process of the completion of the double materiality analysis for 2024 and contributed actively with feedback ahead of calibrations carried out by the internal working groups. KBN’s double materiality analysis was considered by the management team and Audit Committee and was approved by the Board of Directors in the second half of 2024. The Board of Directors is informed on a continual basis of relevant matters through the CEO’s briefings and is informed of KBN’s development and risk exposure in monthly and quarterly reports. In connection with the implementation of more formalised sustainability reporting processes, KBN will clarify how it ensures a good flow of information about sustainability reporting work throughout the year. In addition, the CFO will brief the Audit Committee through the year.

The CFO informs the other members of the management team, and the Board of Directors as required, the latter in consultation with the CEO, and is responsible for ensuring that material topics in the sustainability area are addressed by KBN's strategy work, decision-making processes and risk assessment processes in collaboration with the first line of defence. The management team and Board of Directors will be involved in monitoring all impacts, risks and opportunities.

All employees are included in a collective variable remuneration scheme. The scheme applies to all employees, is based solely on quantitative criteria, represents a limited proportion of the overall remuneration received by individual employees, and does not incentivise risk.

The Board of Directors determine the collective variable salary scheme. There are no criteria in KBN’s variable salary scheme that are specifically related to sustainability. See the Report on the remuneration of KBN’s senior executives available on KBN’s website for more information.

The Norwegian Transparency Act requires organisations that fall within its scope to carry out due diligence assessments in line with the OECD’s Guidelines for Multinational Enterprises. The OECD Due Diligence Guidance for Responsible Business Conduct is designed to help businesses understand and implement due diligence assessments in accordance with the OECD’s guidelines. The due diligence assessment comprises six steps and is summarised below:

Figure: OECD's due diligence guidelines

1. Embed responsible business conduct into policies and management systems

2. Identify and assess adverse impacts in operations, supply chains and business relationships

3. Cease, prevent or mitigate adverse impacts

4. Track implementation and results

5. Communicate how impacts are addressed

6. Provide for or cooperate in remediation when appropriate

This process is continual, and KBN has worked to adapt it to the company’s size, nature and context. The process is evaluated regularly, and the measures are adjusted in the event of changes to its risk assessments and other matters.

The scope of KBN’s due diligence assessments primarily relates to the assessment of suppliers, and KBN is working to implement a new system solution for procurement and for assessing and monitoring suppliers. The question of which other internal processes will be included will be assessed on a continual basis.

KBN is in the process of producing a more formalised approach to risk management and internal control relating to sustainability reporting. This means that risk assessments, risk management and effective internal control systems will be established for impacts, risks, opportunities, and incomplete compliance with standards for material topics. This will not be fully implemented in connection with KBN's 2024 statement, but it will be an important part of the implementation of CSRD and KBN will work on this in a targeted way throughout the first mandatory reporting year in 2025, and subsequently the following year.

The process for risk management and internal control will follow the general principles for KBN's internal control system. These principles are briefly described below and summarised in the diagram.

KBN’s internal control system consists of the organisational structure with its governance bodies, framework in the form of strategies, guidelines, instructions/mandates, risk appetites and risk frameworks, and process documentation/procedures, risk management, compliance checks and associated reporting. Together these elements are intended to ensure that KBN has effective internal control.

KBN’s organisational structure is intended to be clear and transparent with a clear division of responsibility and reporting limes. Internal control at KBN is organised into three lines of defence, with executive functions (operational and staff functions) representing the first line of defence, control functions the second line of defence, and the internal auditor the third line of defence. The purpose of the lines of defence is to ensure independent control over KBN’s activities and first-line risk management. This ensures KBN’s activities are operated in a reliable, robust, and efficient way within the applicable external and internal regulations. KBN’s control functions are independent of the functions and areas subject to their controls.

Figure: KBN’s internal control system

The risk associated with KBN’s 2024 sustainability statement (the transitional statement) will generally relate to intended or accidental omissions or errors in the understanding of the reporting requirements. KBN, acting through the CFO, has taken measures to reduce this risk to an acceptable level pending implementation of more formalised sustainability reporting routines and procedures. The management team has been updated on a continual basis throughout the reporting period regarding the status of KBN’s implementation of sustainability reporting in accordance with CSRD, and the implications of this for risk and internal control have been discussed.

With total assets over NOK 550 billion, KBN is one of the largest financial institutions in Norway. KBN is owned by the Norwegian state to provide stable, long-term and efficient financing to Norwegian municipalities, county authorities and companies that perform local government tasks. The state also owns KBN to help facilitate the sustainable transition and value creation. KBN provides a broad range of lending products to the local government sector, including both green and normal loans.

KBN’s value creation is intended to balance financial, social, and environmental factors so that return over time is generated within sustainable limits. KBN has been designated a systematically important financial institution on the basis of an assessment carried out by the Financial Supervisory Authority of Norway adopted by the Norwegian Ministry of Finance, that is founded on KBN’s total assets as a share of mainland Norway’s GDP and its lending to the Norwegian public sector as a share of total lending to the sector in Norway. KBN finances its activities by ensuring it has efficient access to the world’s capital markets. Maintaining a credit rating equivalent to the Norwegian state’s (AAA) rating is essential to KBN’s business model.

KBN’s sustainability related objectives are integrated into the strategy and are monitored on a continual basis in the same way as its other objectives. In 2025, KBN will work on setting and defining more specific targets for KBN’s material topics. For 2025, KBN’s strategic objectives of relevance to sustainability are summarised in the table below:

Figure: Strategic objectives - Sustainability

Stakeholders are defined as all parties that are affected by or have an interest in KBN’s sustainability reporting or sustainability work. Stakeholders internal and external to KBN were involved in KBN's double materiality work, as part of both the calibration and validation processes. In addition to carrying out interviews with stakeholders, KBN also based the assessments on prior discussions with stakeholders. A summary of material stakeholder groups is provided below, as well as details of how KBN communicates with them and the topics usually discussed.

KBN has two groups of external stakeholders: affected stakeholders and users of the sustainability statements. Stakeholders may belong to one or both of these groups.

AS = affected stakeholders US = users of the sustainability statement 

KBN’s business model and strategy seek to balance different stakeholders’ expectations. Moving forward, KBN will develop a transition plan and ensure it aligns with the business strategy. KBN will, through dialogue with stakeholders, map out how the different strategic objectives will impact its stakeholders’ experience and expectations. KBN will gather its stakeholders’ points of view by means of various channels and they will be communicated to management and internal governance bodies by means of inter alia committee meetings, management team meetings, working environment committee meetings and board meetings.

The double materiality analysis was carried out in accordance with the requirements in ESRS 1. In the analysis, KBN’s positive and negative sustainability-related impacts on society were identified and assessed, as well as the financial risks and opportunities for KBN.

Figure: Illustration – double materiality

As described above, KBN conducted a double materiality analysis in 2024 in accordance with the requirements of ESRS 1 in order to identify the material impacts, risks and opportunities facing it. Stakeholders were identified, and KBN’s value chain was mapped. Below is an overview of the process that was followed:

Figure: The process for identifying and assessing double materiality

KBN set up two working groups to assess impact materiality and financial materiality. The working groups consisted of representatives from various KBN departments, with members possessing relevant backgrounds to effectively assess environmental, social, and governance matters. At the same time, interviews were conducted with both internal and external stakeholders.

An overview of the stakeholders that were interviewed:

1. The Chair of the Board of Directors
2. A representative from the capital markets (issue manager/investor)
3. A representative from the Norwegian Association of Regional and Local Authorities
4. An external expert with previous experience as a member of the Board of Directors of KBN
5. The head of Green Finance, a section in KBN’s lending department

For material topics, KBN has used the flowchart in Appendix E to ESRS 1 to determine which information to include in the sustainability statement.

The table below summarises the assessments made as part of the double materiality analysis for topics/standards that were not determined to be material.

KBN will in 2025 initiate the preparation of a transition plan in accordance with the requirements in the CSRD.¹ The plan aims to provide a comprehensive understanding of KBN’s past, present, and future climate actions, and to explain how KBN’s strategy and business model align with the transition to a sustainable economy. In accordance with CSRD requirements, the transition plan will also demonstrate how KBN will help mitigate global warming to 1.5°C in line with the Paris agreement, with the objective of reaching climate neutrality by 2050.

KBN has used the Task Force on Climate-Related Financial Disclosures (TCFD) framework to assess and report on climate risk. In 2024 KBN carried out an updated analysis, the results of which are summarised in the table below:

Figure: KBN’s climate risk assessments

KBN follows developments in the customers’ financial situations and the capital markets in order to be able to offer stable, long-term and efficient financing. Financial tools to promote the customers’ selection of green lending products are balanced against its owner's return expectation².

KBN is a member of the Zero climate foundation, the Norwegian Climate Foundation (Norsk Klimatstiftelse), the organisation “Sirkulær praksis” and the Norwegian Green Building Council (Grønn Byggallianse), which are organisations that KBN considers to be important contributors to the green transition.

KBN has for a number of years awarded the prize for the "Local Climate Measure of the Year". This prize, which is a collaboration between the Norwegian Association of Local and Regional Authorities (KS) and Klimastiftelsen Zero climate foundation, is awarded at the Zero conference each autumn and is aimed at local government sector projects.

KBN has in recent years carried out several activities with the Norwegian Climate Foundation, including running projects, publishing information booklets and holding webinars.

In 2024 KBN also entered a collaboration with the Norwegian Association of Local and Regional Authorities in relation to the ‘Sirkulær praksis’ (‘Circular practice’) conference, which is a local-government sector-specific part of "Den store sirkulærkonferansen' (‘The Big Circular Conference’), organised in May. KBN provides content for the conference and has a stand.

Through its membership in the Norwegian Green Building Council, KBN also sits on the jury for the BREEAM prize, which is awarded to real estate developments and building owners that have invested in sustainability and have documented this with certification. The prize was first awarded in 2024, with separate prizes for new buildings and renovations, in addition to a separate honorary award.

In 2025 KBN will continue the work with assessing how it can increase its positive impact on the green transition.

KBN publishes a separate impact report in addition to the Annual Report. The impact report gives investors and other stakeholders detailed information about the projects which are financed by KBN’s green bonds. At the end of 2024, KBN’s outstanding green loans totalled NOK 64 billion across 537 local government projects, 64 of which were new projects in 2024.

Read KBN’s complete 2024 Impact Report.

KBN uses 2019 as the base year for the greenhouse gas accounts, and emissions are calculated using the principles in the GHG protocol. In 2024, KBN’s greenhouse gas emissions totalled 15.8 tCO2e in scope 1 and scope 2, which represents a decrease of 59% from 2023. For electricity, KBN uses location-based emissions. The difference between location-based and market-based is that location-based calculates emissions based on the actual energy mix in the geographical area where the electricity is produced, while market-based calculates emissions based on the electricity that is bought and sold in the market. This can include electricity from both renewable and non-renewable sources.

KBN’s scope 3 emissions totalled 66.8 tCO2e in 2024, which is a decrease of 13% from 2023. The scope 3 emissions that are currently included in KBN’s greenhouse gas accounts comprise waste in addition to business travel. KBN is in the process of producing a method for calculating its scope 3 category 15 emissions, i.e. its financed emissions.

KBN’s 2024 greenhouse gas emissions are divided between the scopes as follows:

• Scope 1: 0 tCO2e
• Scope 2: 15.8 tCO2e
• Scope 3: 66.8 tCO2e

Emissions intensity is a measure of the relationship between total greenhouse gas emissions and financial activity/value creation. KBN’s results for 2024, 2023 and the base year of 2019 are summarised in the table below:

Greenhouse gas accounts:

KBN seeks to offer high-quality and safe working conditions that are also in line with all relevant legislation and regulations. KBN’s equality statement in accordance with the Norwegian Equality and Anti-Discrimination Act is published on the website.

KBN has issued guidelines that describe what KBN expects of employees, and what the employees can expect of KBN – see the description of the most relevant topics in the employee handbook below. It is KBN’s CEO who is responsible for implementing and monitoring guidelines in the HR area.

KBN’s employees are its most important resource, and KBN is therefore committed to following up with and engaging in dialogue with each individual employee. KBN uses the following arenas to facilitate employee engagement:

• Annual employee performance reviews, including mid-year reviews between the employee and his/her line manager. These reviews are an arena for following up on topics that are particularly important to each individual employee.
• Annual employee surveys.
• Employee representatives on the Board of Directors, the Working Environment Committee and the pensions steering group, as well as employee involvement as safety representatives and through trade union representation.
• Employee representatives on internal projects concerning employees.
• Whistleblowing channels.
• Annual discussions with employee representatives in accordance with legislation and collective agreements.
• Safety inspections.
• Continual dialogue using the intranet, posting in shared channels and all-company meetings.

The most common topics for communication with employees are well-being, workplace adaptation, employment conditions, working conditions, inclusion and equality, training and development opportunities, and general company information.

The Chief of Staff and Head of HR represent KBN as the employer in dialogue with employee representatives on the Working Environment Committee and in other contexts in which KBN has contact with the employees, and they strive to ensure employee engagement.

Whistleblowing channels

KBN does not accept discrimination or harassing behaviour, or physical, psychological, or sexual violence. Such behaviours are prevented by means of general working environment measures, and the employee handbook describes the whistleblowing procedures. Employees can whistleblow using various channels, internally at KBN to their employer or a health and safety representative, employee trade union representative or the employer’s law firm, as well as to KBN’s external whistleblowing channel (PwC) or publicly by means of a public supervisory authority or other public authority. An electronic whistleblowing channel is available to all KBN’s employees on the intranet, and as mentioned, there is also an external whistleblowing channel provided by an external organisation. Information on KBN’s channels and procedures for whistleblowing is provided as part of the annual training provided on KBN’s Code of Conduct.

Refer to the G1 Business conduct section for more information on KBN’s whistleblowing procedures.

KBN is a competence-based business, and an important part of the strategy is ensuring that the organisation continuously renews its competence to ensure it is relevant and creates value for the customers in the future. However, it is also important for KBN to renew and increase its competence to prevent operational incidents and counteract operational inefficiency. KBN has relatively few employees and each of them possesses unique competence. It is therefore important that all KBN’s individual employees maintain and develop competence that is relevant to their specialist field (depth) and for KBN as a whole (breadth).

From 2021 to 2024 inclusive, KBN had a scheme called ‘kompetanseløftet’ that involved all employees being required to complete two days’ training each year, and KBN had a strategic objective of over 75% of employees completing the scheme. Starting in 2025, the scheme is to be continued but in a different format, and KBN’s strategic objective will be replaced by KBN running three internal courses each year. The option to attend external courses, conferences and similar will be continued, including through individual competence development budgets, without there necessarily being an associated strategic objective.

KBN has set strategic targets in the ‘Expertise and technology driven’ strategy pillar that concern its own workforce.

The table below summarises the characteristics of KBN’s employees, including the turnover rate.

In 2024, five employees left by ordinary resignation, and a total of 10 employees left KBN's employment.

In 2025 KBN will work on mapping statistics for non-employee workers in the workforce.

The tables below summarise the distribution between age groups and position levels, between women and men.

KBN works to have a high level of inclusion and diversity. It works in a targeted way in recruitment processes to attract a variety of candidates. It can be challenging to attract sufficient female candidates particularly for the specialist areas of front-office finance, risk management and technology.

KBN satisfies the gender representation requirements for the Board of Directors, and the Board has for a number of years had an equal distribution of men and women.

The table below summarises the average wage for women and men at KBN.

All KBN’s employees receive wages that follow general wage growth in society.

All employees are covered by statutory social schemes through the state or Norwegian law. They are members of collective personal insurance schemes, health and travel insurance, and are offered health checks through KBN.

None of KBN's employees have notified KBN that they have a disability. There is no obligation for employees to report any disability they may have.

The table below summarises statistics for KBN’s monitoring of competence development and completed competence development.

There was a good level of participation in the Kompetanseløftet scheme in 2024, and KBN achieved the target of over 75% of employees completing the scheme.

The table below summarises the statistics for sick leave and accidents at work.

The table below summarises employees that have the right to parental leave and the number of employees who have taken parental leave over the course of the year.

The table below summarises the average wages received by women and men, and the proportional difference between men and women. The figures in the table do not include variable salary payments.

As there are only two female middle managers/subject specialists and three female administrative employees, the average salaries and ratios have not been disclosed for these two job levels.

The reason for the higher average salary for men at the subject specialist employee level is that the male employees concerned have on average worked at KBN for longer than the women.

The table below summarises incidents, complaints, and serious human rights breaches. There were no incidents, complains or serious human rights breaches at KBN in 2024.

KBN’s credit strategy for lending activities, along with the guidelines for lending and credit assessment principles for borrowers, provides the framework for monitoring customers. This framework determines what needs to be assessed when entering into and continuing customer relationships, as well as when issuing new loans. The guidelines and principles are important governance documents for how KBN is to exercise its role, share its knowledge and contribute to the development of competence, financial management skills and quality of the decisions of the customers. The risk of a negative impact resulting from KBN providing incorrect or incomplete information is decreased by means of clear guidelines for how and what type of advice customer managers can give customers.

KBN’s business model and strategy are intended to help maintain and strengthen the local government sector’s socioeconomic condition, thereby contributing to the achievement of Article 22 of the Universal Declaration on Human Rights: "Everyone, as a member of society, has the right to social security and is entitled to realization, through national effort and international co-operation and in accordance with the organization and resources of each State, of the economic, social and cultural rights indispensable for his dignity and the free development of his personality".

The local government sector is undergoing a period in which it has less financial room for manoeuvre, less access to labour and an increasing number/proportion of residents over 80 years old. Many municipalities are also seeing a reduction in the number of children and working age adults. There has been a shift from a period of good financial results and the building up of contingency funds in the local government sector’s accounts to a period of weaker financial results and less financial strength (Regjeringa bidreg i ei krevjande tid for kommunane). Despite measures targeting the sector’s finances (including extra transfers from the state and cuts to municipal budgets) and a change to the revenue/income system to favour municipalities with low tax burdens, economic growth in the coming years will likely be weak and all municipalities and county authorities will go through a period of significant adjustment.

This financial situation will affect KBN’s customers’ financial room for manoeuvre and the priorities they set. This may mean a reduction in investment activity, which will affect the demand for new loans. At the same time, the local government sector’s period of adjustment may trigger investment due to restructuring, for example from a school to an elderly care facility, so that the impact on debt growth and demand is more complex. By being a forward looking and responsible lender, KBN can share knowledge and expertise with the local government sector and be a support to the customers. KBN's plans in this respect are set out in the Financial sustainability section below.

Economic sustainability is about ensuring that economic growth and development can be maintained to ensure the security of people and society over time. It also means taking responsibility for stable, long-term, and ethically responsible economic growth so that economic growth today is not at the expense of future growth, while also being able to deliver sufficient services to residents. In a local government context, it means ensuring that budgets are adhered to, having contingency funds, and ensuring that the level of borrowing is manageable over time. KBN provides stable, long-term, and efficient financing to municipalities, county authorities and companies that perform local government sector tasks. As KBN's owner, the Norwegian state expects KBN to play a role as a facilitator of the sustainable transition and greater value creation pursuant to its rationale for state ownership of KBN. These considerations are built into KBN’s strategy. KBN provides a broad spectrum of lending products to the local government sector, including both green and normal lending products. KBN's value creation is intended to balance financial, social, and environmental factors so that return over time is generated within sustainable limits.

KBN’s position as the largest lender to the Norwegian local government sector grants it unique knowledge and expertise in the lending market and local government sector. Consequently, KBN has the opportunity to share this knowledge and contribute to the development of competence, financial management skills, and the quality of decision-making by the customers. KBN also seeks to contribute to the long-term financial sustainability of its customers. Based on KBN’s approach to responsible lending and the credit model, it will become more important in the future for KBN to support the customers to take high-quality and future-oriented decisions that address financial sustainability and the health of local communities.

KBN can achieve this by closely monitoring the customers and more specifically by emphasising financial sustainability in discussions with the customers, by being clear and transparent about the assessment of the credit worthiness of the customers, and by setting a clear expectation for economic growth to continue to be able to provide loans. This will also mean that in some instances loans will not be offered when KBN considers, based on the credit model, that the customer is not in position to service further new borrowing. Going forward, these will be important tasks for KBN’s lending department to support long-term and sustainable debt management by the customers.

As part of the lending process, KBN assesses the creditworthiness of the customers. KBN’s credit model provides a good picture of individual municipalities' and county authorities’ financial position. The model is intended to facilitate enhanced financial monitoring of KBN’s customers. There are three categories of key figures in the model, which are:

1. Financial key figures (80% of the total weighting)
2. Demographic and socioeconomic key figures (11% of the total weighting)
3. ESG (9% of the total weighting)

The financial key figures provide a snapshot of each customer’s financial situation, and this, in combination with the demographic and socioeconomic key figures, provides an indication of future developments.

A low score on KBN’s credit model will result in a requirement for any loan request by the customer concerned to be considered by the Credit Committee and, potentially, approved by the CEO. For customers with the lowest credit score (red), new loans may need to be approved by the Board of Directors. This ensures that, although KBN has minimal real exposure to credit risk, lending activities align with those of other banks and regulations. It also allows KBN to monitor customers’ financial situations (despite their inability to be declared insolvent) and to exercise the role as a responsible organization contributing to sustainable debt management by Norway’s municipalities. KBN’s credit model and credit assessments are made available to customers in the customer portal and are included in KBN’s dialogue with customers such that KBN shares its knowledge, and discussions are adapted to the financial situation of each customer. If desirable, KBN can also contribute to discussions with the customer's elected representatives, either on its municipal council or its executive committee.

As part of the lending process, KBN engages in dialogue about financial sustainability and economic development with the customers. In special instances, KBN also discusses the prerequisites needed to continue providing loans. KBN holds information on economic development, investment history, and forecasts for each customer and the sector as a whole. This information provides a basis for productive dialogue and discussion with customers, contributing to the development of their competence, financial management skills, and quality of decision-making. KBN’s vision is: "We finance the local communities of tomorrow". KBN achieves this by financing the customers’ investments in new buildings and the renovation of existing ones, as well as infrastructure projects (e.g., water and wastewater). These efforts help to increase and maintain the level of economic activity, social interaction, and welfare of local communities in Norway. Through dialogue and knowledge sharing with customers, KBN has the opportunity to be a leading source of knowledge and insight. This helps to identify the nature of historical financing and investment decisions. Such information can be valuable for customers to consider when making future decisions.

KBN’s Code of Conduct is a guide to the behaviour that is expected of KBN’s employees. It is the Board of Directors that approves the Code of Conduct, and all KBN’s employees are required to be aware of it. In addition to the Code of Conduct, KBN has General Guidelines for Measures to Combat Money Laundering and Terrorist Financing, General Guidelines for Sustainability and General Guidelines for Market Conduct. There are also various supplementary guidelines approved by the CEO, which cover inter alia whistleblowing, sustainable investment, money laundering and investments in KBN’s investment universe. These provide the instructions for KBN and the employees’ conduct.

Annual training in key conduct rules is provided for all employees under the supervision of the compliance department, and all employees must confirm each year that they have read and are familiar with the rules.

The Chief Compliance Officer is the document manager and is responsible for monitoring the Code of Conduct.

The Compliance Function has its own manager and the function’s independence is ensured by means of a separate reporting line to the CEO and Board of Directors.

The management team and Board of Directors discuss and consider KBN’s corporate culture on a continual basis as part of the company’s strategy process. KBN’s Board of Directors produces the general guideline documents and the administrative management issues more detailed guidelines as needed, which are approved by the CEO. The guidelines are reviewed annually.

KBN’s conduct rules emphasise the importance of respect, a high level of integrity and transparency. Employees are responsible for acting in accordance with KBN’s values. In addition to the conduct rules, KBN has a wide range of other guidelines that provide instructions and are intended to promote a healthy corporate culture. This applies to KBN’s guidelines on sustainability, measures to prevent money laundering and terrorist financing, IT and data management, risk management and internal control, the assessment of conflicts of interest, privacy, security management, market conduct, supplier management and information management.

KBN’s remuneration scheme is primarily based on individual remuneration. Individual salary assessments are based on set criteria, with half linked to results and the other half to behaviour, development, and compliance. The variable salary scheme is linked to the company's results and is a collective scheme that rewards joint effort and results.

The four pillars of KBN’s strategy will affect and guide the corporate culture – see the section on KBN’s 2025-2026 strategy for a description of the pillars. The four pillars are supported by KBN’s values, which are Open, Responsible and Ahead. These values, which are further described in the items below each value, provide a more comprehensive description of KBN’s desired corporate culture:

Open

• We share our knowledge
• We are open to change, new ideas and perspectives
• Our dialogue is transparent, externally and internally

Responsible

• We take responsibility for our own deliveries
• We show respect for each other’s time
• We exhibit highly ethical behaviour and think about sustainability in everything we do

Ahead

• We renew and extend our expertise the entire time
• We take the initiative, come up with ideas and work to be ahead
• We tackle tasks with speed, enthusiasm and commitment

KBN provides loans to the local government sector and has been designated by the Ministry of Finance as one of four systemically important financial institutions in Norway. It is important for KBN to build an organisational culture and organisational structure that reduce the risk of corruption and bribery.

KBN’s procedures for addressing corruption and bribery are first and foremost covered by the Code of Conduct. There are also separate guidelines for measures to combat money laundering and terrorist financing.

KBN’s governance structure is built such that the second line of defence (Risk management and Compliance) is the CEO’s control function that exercises control over the activities and risk management on the first line of defence, while the third line of defence (the internal auditor) is the Board of Director’s control function, and independently assesses whether KBN is organised and operated in a proper manner and in accordance with the relevant requirements. KBN’s governance structure is intended primarily to reduce the risk of corruption and bribery. It is particularly in those departments which exercise a high level of discretion regarding market participants that there is a risk of corruption and bribery (in KBN’s own operations). Controls intended to reduce this risk to an acceptable level have been implemented in the various departments.

It is important for KBN to have procedures that attend to the rights of whistleblowers, and for the employees to be informed about the processes for managing whistleblowing reports. Whistleblowing and KBN’s whistleblowing procedure are part of the annual training provided for all KBN’s employees on conduct rules. The guidelines are subject to regular assessment and revision.

The guidelines for whistleblowing were produced with the purpose of facilitating a high-quality and constructive climate for expression and a good whistleblowing culture in accordance with KBN’s values. They describe the roles and responsibilities involved, provide definitions for whistleblowing, and set out what constitutes a censurable matter and how employees can whistleblow, both internally and externally. KBN’s Chief Compliance Officer manages KBN’s whistleblowing channels and will normally be the person who processes whistleblowing reports that are received internally, but he/she also ensures that KBN has an external whistleblowing channel.

Individuals can whistleblow anonymously. KBN’s internal whistleblowing channel maintains personal confidentiality and only stores a whistleblowers’ personal data to the extent required for the report to be processed. If an individual wishes to remain anonymous, he/she can use KBN’s external whistleblowing channel, which can be found on KBN’s website and intranet.

In accordance with KBN’s guidelines on whistleblowing, any person who receives an internal whistleblowing report must ensure it is treated properly and confidentially. The guidelines establish a duty to act and a duty of care, which means that the report must be processed within a reasonable amount of time and to a reasonable extent, and that the person who receives the report must ensure that the whistleblower has a proper working environment. As a rule, information is deleted within three months of the end of a whistleblowing case. Retaliation against whistleblowers is prohibited.

As a general rule, whistleblowing reports must be handled by KBN’s Chief Compliance Officer. The person who receives a whistleblowing report can, if the matter can easily be resolved by the recipient, address the report. This is in line with the duty to act and duty of care.

There were no whistleblowing reports at KBN in 2024.

Expertise and technology driven is one of the four pillars of KBN’s commercial strategy, and it means that KBN must both satisfy current information security requirements and be well-equipped to deal with future developments in technology.

IT and cyber security are important for KBN to protect sensitive data, prevent financial losses, maintain trust in the market, comply with legislation, ensure continuing operations, and avoid causing losses or disruption for customers and counterparties because of weak security procedures at KBN. The Board of Directors has determined that KBN’s risk appetite for operational risk, including IT and cyber risk is low, and resources for risk-reduction measures are prioritised.

KBN’s general guidelines for security management, risk management and internal control, and IT and data management set limits and requirements for KBN’s governance of IT and cyber security. The Chief Technology and Operations Officer is responsible for the security governance framework and carries out a risk and vulnerability analysis each year for the IT and cyber area, and this determines which actions and measures are implemented and carried out to ensure KBN operates within the established risk appetite for the IT area. Security measures in IT and cyber security are intended to ensure the confidentiality, integrity and availability of the information and systems, both physical and digital, that are used by KBN.

All of KBN’s critical business processes and support functions depend on IT systems and services, and it is therefore important that all employees have basic knowledge of good security procedures and put them into practice. KBN provides annual training in IT and cyber security as part of an obligatory review of the Code of Conduct for all employees. IT and cyber security training is also provided in the form of phishing tests and participation in Norway’s national security month and quizzes.

KBN uses CIS Controls as the technical standard for implementing security measures. Threats are monitored and technical vulnerabilities are closed on a continual basis. Security tests are carried out at different levels, including different penetration tests. The internal auditor carries out independent tests and checks annually.

In 2024 there were no registered incidents or fines related to corruption, bribery, or money laundering at KBN, nor is KBN aware of any incidents at organisations in the value chain in which KBN has been directly involved.