In line with its Financial Stability Council’s decision, the National Bank of Hungary (Magyar Nemzeti Bank, MNB), as a supporting party, will endorse the UN’s Environmental Program Finance Initiative’s Principles for Responsible Banking (Principles). By endorsing the Principles, MNB seeks to encourage as many banks in Hungary as possible to become signatories of the Principles, which in turn are aiming at fostering environmental protection, social sustainability and responsible corporate governance.
According to a communiqué by MNB, the Principles expect signatory banks to align their own business strategies with the goals of sustainable development, to reduce their socially, environmentally harmful impacts emerging through their products and services, and to strengthen positive effects. To achieve favorable environmental and social impacts, credit institutions are expected to consult with their affected parties: their customers, investors and partners and other stakeholders more intensively. All this should be put into practice by applying effective corporate governance and creating the appropriate corporate culture. In addition, the Principles expect continuous monitoring of the implementation and the revision of the objectives, if necessary.
The document says credit institutions, signing the Principles in writing, must review their business operations within 18 months with UNEPFI experts’ offering assistance in methodology, to pinpoint elements therein, making the most significant impact on the environment. Subsequently, a minimum of two specific targets must be publicly set in consistence with the sustainability efforts, e.g. climate protection. Their progression towards those objectives and the results must also be publicly communicated. An objective, to be formulated, can be for instance, sustainable agriculture or the completion of a specific, realistic, but ambitious task in green energy production funding.
160 credit institutions around the world have signed the Principles, including several parent banks of credit institutions in Hungary. None of the domestic market participants has, however, signed it yet. Therefore, as a supporting institution, using its own prestige and authority, the MNB decided to draw domestic banks’ attention to actual, accountable commitments linked to responsible operation.
All this fits well into the series of MNB’s green efforts, which include the promotion of lending to finance activities supporting sustainability; the organization of consultations, trainings for bank management and experts in the subject; the creation of a Hungarian Green Finance Award and the encouragement of other social initiatives to increase climate awareness. To achieve the same objective, MNB will prepare additional supporting measures in the future.