MNB: Record High Green Loans Stock Last Year

Hungarian banks have disbursed almost HUF 880 billion in loans through the Green Capital Requirement Relief Program of the National Bank of Hungary (MNB), according to the aggregate amount disbursed by the end of 2023.

The head of MNB's Sustainable Finance Department, Norbert Holczinger said at a press event in Budapest on Wednesday said that the vast majority of green loans, almost HUF 673 billion, financed companies, most of them energy production and electromobility. The importance of green corporate lending is shown by the fact that its total value increased by 75% compared to the previous year, while total corporate lending increased by 4%. Of the remaining share of green lending, green housing loans accounted for HUF 123 billion and green bonds for HUF 85 billion at the end of 2023.

According to MNB's green report, climate risks of credit institutions have increased significantly, especially those financing agriculture and energy production. Overall, 16.26% of corporate credit exposures are green risky, the highest ever. At the same time, Norbert Holczinger described the upturn in real estate finance, including lending for sustainable commercial real estate, as a positive development. Energy efficiency upgrades are also becoming increasingly popular among the general public, which is important because two-thirds of the domestic housing stock is still not up to date in this respect.

The green capital market also strengthened last year, with green bonds accounting for 24% of the total portfolio. Their total rose from HUF 539 bn to HUF 860 bn in a year, with a green share of 86% of corporate bonds issued last year. The share of green investment funds is still low, but their growth rate will reach 80% in 2023, he added.

Norbert Holczinger noted that the amount of loans covered by the green central bank discount program is not negligible in the total loan portfolio today. Green financial products are becoming increasingly popular, so their uptake is set to continue, with new regulations pushing companies towards sustainability investments. The upturn in green lending is also positive because both domestic and international experience shows that green loans are less risky than others. He also said that a two-year project with the OECD and the European Commission to investigate the rising financial risks of biodiversity loss will end in June. The publication of the results of the research could be a milestone in the history of the central bank, as this area is still largely unexplored. Norbert Holczinger added that the central bank's ESG recommendation will also be published in a few months, and from Wednesday the new green website will be available alongside MNB's latest green report.