Annual reports
CEO's foreword

In 2017 we celebrated the 90th anniversary of KBN's role in financing welfare service provision by the Norwegian local government sector. Through our lending to municipalities and county authorities, we helped to finance the construction of power stations before and after World War II, the construction of schools in the 50s and 60s, and the investments needed for a range of reforms such as the Nursery Reform. KBN and its customers have played a central role in the creation and development of the Norwegian welfare state.

KBN has not incurred a single loss on its lending to the local government sector at any time in the 90 years that it has been in existence. Our credit rating, AAA/Aaa, ensures that we have stable access to funding on favourable terms and are able to offer the lowest possible interest rates on lending. The low interest rates offered by KBN ensure investing in welfare services does not constitute a greater burden on municipalities’ budgets than necessary. Our profits are returned to society through the dividends we pay to the state as our owner.

KBN will continue to play an important role in the decades ahead as the task of financing the welfare state becomes more challenging. The proportion of the population actively engaged in the labour market will continue to fall, but the working population will have to support the increasing costs associated with an ageing population. These demographic changes will place greater demands on the welfare services provided by the local government sector. Moreover, it is likely that these changes will coincide with a decline in the country's income from the Norwegian continental shelf. The Productivity Commission describes this as a shift from a resource-based economy to a knowledge-based economy. This will in turn increase the need for expertise and skills. The way in which municipalities and county authorities invest in good schools, automation and digitalisation may prove to be key factors for our success as a society. In addition, the shift towards a low-emission society will also need very significant investment spending. KBN's objective is to be a long-term partner for the efficient provision of welfare services, a good standard of local welfare and a greener society.

KBN plays an important role in Norwegian society as the largest provider of financing for local government investments. We are committed to taking a long-term and responsible approach to our role, and to helping the local government sector to find good financial solutions. Our role in society brings with it the expectation that we shall be open and transparent, maintain high ethical standards and play a driving role in the development of corporate social responsibility. An important part of KBN's corporate social responsibility is helping our customers maintain a sustainable financial position and exercise strong financial and debt management. Key concepts for this work in 2017 were digitalisation, better information and tools to support financial decision-making, and close collaboration with our customers.

2017 was a good year for KBN's financial performance. We achieved some increase in our market share as a result of greater demand for long-term loans. KBN's standard interest rate was reduced on 1 August from what was already a low level. The proportion of lending that is provided for environmental and climate-friendly projects increased.

We intend to work hard in 2018 to accelerate the growth of our green lending. The welfare investments for which KBN provides financing today will last well into the low-carbon society. Our obligations in respect of the climate and climate risk therefore need to be part of the basis on which we make decisions today. We want to help to increase our customers' awareness of climate risk. KBN is committed to taking a leading role in the development of green finance both in Norway and internationally. In 2017 KBN was elected to the Executive Committee of Green Bond Principles, which is the leading international standards authority for green bonds. KBN also collaborated in 2016 and 2017 with nine other Nordic issuers of green bonds to produce a joint reporting framework.

The #Metoo campaign started in the USA in autumn 2017 and quickly reached Norway. The campaign has created extensive debate and awareness of the issue of unwanted sexual attention, and a number of high profile individuals in politics, business and the media have lost their jobs and positions as a result of victims of misconduct speaking out about their experiences. This campaign seems likely to represent a turning point in work on gender equality.

KBN is committed to diversity and equality, and has an overall gender balance that complies with its 40% target. Our employees represent many languages and nationalities. This has a positive effect on our corporate culture, attitudes, working environment and expertise. It is essential for us to attract the best minds and the best expertise. This means that KBN must be recognised as an attractive and inclusive place to work. In addition to our internal work on diversity and equality, we also expect our suppliers and partners to work systematically on these issues both in their own organisations and with their own suppliers and subcontractors.

KBN is committed to working closely with its customers to create financially and environmentally sustainable municipalities and county authorities that deliver a high standard of local welfare.