Green Finance in Hungary: Supporting Sustainability

Green Finance in Hungary: Supporting Sustainability

Improving sustainability is a common goal for everyone, as it makes our environment more livable in the long run. The green finance guide of the Central Bank of Hungary is key in making Hungarian green finance more prevalent in the investment scene, and in turn, making Hungary an even more attractive destination for investors looking for new markets in Europe.

Sustainability permeates our life more and more. It is not only buzz-word: it is an attitude to arrange aspects of life in a way that they can continue to generate profit in the long term, regardless of the nature of this profit. The gain can of course be hard cash, but it can also be more efficient energy-consumption, cleaner air, more general access to utilities, or any step that takes us closer to general welfare.

Green finance is closely related to sustainability: it refers to the process of taking environmental and social considerations into account when making financial decisions. The environmental factor concerns mitigating climate changes and creating a cleaner, healthier environment, while the social factor concerns the community, including issues of equality, inclusiveness, and labor relations.

While sustainability is often included in the corporate social responsibility programs of companies, it is essential that governments also encourage green projects through regulations and incentives.

The Central Bank of Hungary (Magyar Nemzeti Bank, MNB) created its guide for green finance in line with the sustainable finance framework of the European Union. Its main goal is to promote green investments, which should be subject to more favorable financing conditions. At the same time, financing institutes should be careful not to let the expansion of green financing lead to creating less financial stability for individuals or increasing financial risk for any stakeholders. The MNB makes recommendations for integrating the green aspect into risk managements by banks, and helps banks define what should be considered green investment projects.

Defining standards for dedicated green financial products and collecting them in a green product register will also enhance transparency and help consumers find and compare green options. The clear standards will also help everyone avoid greenwashing, which is a significant risk, since making a project look green might be easier than creating a project that is actually beneficial for long-term sustainability. Defining standards goes hand in hand with another goal: supporting the development of a customer base and creating a demand for green financial products (mostly among SMEs). Raising awareness pertains to experts as well: facilitating research and training will support the creation of more green financial products.

There are plans for redirecting bank funding into a green direction through the capital requirements of assets, which is relevant especially for energy efficiency investments. Green bonds, which are currently among the fastest growing financial instruments, can promote the long-term funding for green financing. On a side-note: regulatory changes to further reduce the use of paper are already making the business operations of financial organizations greener.

The above make Hungary an ideal destination for green investment. Combined with the western infrastructure and the cost-effective, expert workforce, all is in place for entering the European market with the most favorable conditions. Procedures for company formation and setup in Hungary allow a quick and worry-free business launch. Company registration takes only 4-5 business days, and it is possible with a power of attorney, without you being present in person. That way you must travel to Hungary only once, to open your company bank account.

Since Hungary is an EU member state, local regulations are in line with EU directives. Of course, staying compliant requires expert local administrative assistance, but many providers offer accounting for foreign-owned businesses in Hungary, together with business consulting and tax advisory in English, taking into consideration that business owners are not familiar with local requirements.

Incorporating sustainability in investment projects as well as all other aspects of our lives lets us create value in the long run. Not only it makes our environment more livable, but it also lets businesses flourish for longer, creating a steadier flow of income and a more stable economy for all of us. The guide for green finance by the MNB is a great step on our road to increasing sustainability.