Central Bank to Support Green Finances

By implementing its Green Program, the National Bank of Hungary (MNB) wishes to contribute to reducing risks related to climate change and other environmental issues and to raising the volume of green market financing in Hungary.

Following the measures already taken in the banking sector, the Bank says it will start introducing green finances in the capital market. This involves the publication of an analysis of the Bank’s regulatory measures to promote green bond issuance.

Under the Green Program, MNB is constantly searching for possibilities to improve the conditions of green investment funding. Consequently, in addition to the measures concerning lending already taken and in progress in the banking sector, the MNB will also start to support the introduction of green finances in the capital market in co-operation with other authorities and market participants.

In this attempt, green bonds could be flagship instruments, as their segment has shown impressive growth over the past few years in foreign advanced markets. However, with some exceptions, it is still at an early stage in Hungary – and in Central and Eastern Europe in general. An exception is the recent issuance of Hungarian Green Government Securities. The start of green bond issuances in Hungary may contribute to the financing of the country’s climate, sustainability and energy strategy objectives, and it can support the turnaround in competitiveness strongly promoted by the MNB.

Nevertheless, the issuance of green bonds by companies, banks and possibly local governments is unlikely to proceed to the desired extent at the start without incentives and supporting actions by the Bank and other regulators. Similarly to other countries, Hungary may also be required to introduce developing and facilitating measures. The MNB presents its relevant ideas in a short analysis. Green market development will become a key topic in designing Hungary’s Sustainable Capital Market Strategy and at the International Conference on Green Finance held by MNB on October 21, where the CEO of Climate Bonds Initiative is also scheduled to give a lecture. This issue will also be discussed at a training on investor relations managers related to sustainability offered jointly by the Budapest Institute of Banking, enjoying the professional support by MNB and the London Stock Exchange Group Academy in October 2020.