The Central Bank of Hungary (Magyar Nemzeti Bank) ensures that the domestic system of financial intermediation should support, environmental sustainability through its financial products, services. This document lays out MNB's vision and possible steps to plan more powerful future measures for environmental sustainability, taking into account the opinions of various stakeholders (financial organizations, government sector representatives, professional and non-governmental organizations).
This consultation document rests on the following principles for establishing and developing the domestic green finance segment:
- green investments (supporting environmental sustainability) should be subject to more favourable financing conditions than other investments, particularly those that are environmentally harmful;
- expansion of green financing must not lead to a deterioration in the individual financial stability and soundness of financial institutions, or to an increase in prudential risks;
- expansion of green lending, investment and other financial services must go hand in hand with the development of risk management; it must be ensured that environmental aspects are considered more prominently in the operation and management of domestic financial institutions than is currently the case;
- it is important to avoid the risk of the appearance of products portrayed as green on the “sideline” of green financing that might be expanding, but deliver no real environmental benefit (the risk of so-called greenwashing).
In line with the above principles and taking into account the plans for the EU sustainable finance framework under development, the MNB examines a number of measures, of which the discussion paper mainly focuses on the following areas:
- establishment and development of environmental risk management systems in the banking sector;
- supporting the development of a retail (and SME) customer base for the demand for green financial products;
- facilitating research and training for experts and the development of knowledge base in the field of green finance;
- defining standards for dedicated green products and collecting these into a green product register;
- redirecting bank funding, especially in the field of energy efficiency investments, into a green direction, through the capital requirements for assets;
- promotion of long-term funding for green financing through the use of green covered bonds;
- regulatory changes to further reduce the use of paper, in order to make the business operations of financial organizations greener.