Recommendations for a Sustainable Capital Market Strategy and Action Plan for Hungary | Deloitte Hungary

To channel capital into sustainable investments market participants need support and incentives, says Deloitte in its recommendations for a sustainable capital market strategy and action plan for Hungary. Without targeted capital mobilisation, the European Union's 2030 emission reduction targets could be jeopardised, as meeting them will require an extra €480 billion per year in investment over this decade.

Sustainable competitiveness is at the core of Europe's economic development and financial system, as set out in the European Green Deal. The Green Deal outlines measures to achieve climate neutrality in Europe by 2050. It sets out the necessary investments and available financing instruments for a just and inclusive transition.

Transition comes at a high price: the European Commission estimates that the EU will need an additional €480 billion per year in green investment, in this decade alone, to meet its 2030 emissions reduction targets. Closing this investment gap is inconceivable without the contribution of capital markets, which is essential to support the greening of the financial sector.

Hungary is also committed to transitioning to a climate-neutral economy by 2050. The Green Programme of the National Bank of Hungary (MNB) in 2019 was one of the first steps aiming to green the financial market, including several incentives to support the spread of green finance. In 2020, with the first sovereign green bond, Hungary has effectively kickstarted the domestic sustainable capital market. The MNB's Bond Funding for Growth Scheme, launched as a monetary policy measure, contributed to the development of the green bond market. Hungary's first corporate green bond issuances took place under this Programme. Finally, following the announcement of the Green Monetary Policy Toolkit strategy, Hungarian green mortgage bonds have been issued since 2021, under the Green Mortgage Bond Purchase Programme.

A domestic strategy and action plan for sustainable capital market operations is in preparation to support the development of sustainable and green finance in Hungary. Deloitte prepared related recommendations at the request of the European Bank for Reconstruction and Development (EBRD) for the Hungarian National Bank, Budapest Stock Exchange and Ministry for Innovation and Technology, with funding from the EU's Directorate General for Structural Reform (DG REFORM).

We formulated recommendations for the introduction of green and sustainable financial instruments linked to fundamentally green outcomes, that can activate capital markets in the transition to sustainable finance in line with the European Climate Law

- said Ákos Lukács, Head of Sustainability and Climate Change service line at Deloitte, who agrees that “greening” the financial system is key to a carbon-neutral economy.

The recommendations, which were discussed by an international panel of experts in January 2022, can be broken down into five themes.

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This project is funded by the Structural Reform Support Programme of the European Union and implemented in collaboration with Deloitte, EBRD, and the European Commission.