In line with its statutory objectives, the MNB considers environmental sustainability as a high priority. In this context, the MNB has prepared its third comprehensive climate risk report (TCFD report), which presents its strategies for environmental sustainability, the sustainability elements of its corporate governance and operations, and the climate risk exposures of its financial assets.
One of the greatest challenges of our time is how to reconcile sustainable economic development and convergence with environmental considerations. A green transition is inconceivable without measurement; the comprehensive climate risk report was compiled in this spirit this year too.
The main motivation is to provide insight into the operations of the central bank and an assessment of the climate risks of its balance sheet, setting an example for the Hungarian financial industry as well as the public sector. The report is based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which was set up by the G20 Financial Stability Board. The TCFD’s recommendations provide guidance on the disclosure of climate-related risks along four main pillars of organizational functioning (governance, strategy, risk management, indicators and targets).
The Green Programme, approved in 2019, defines the MNB’s supervisory strategy, while the Green Monetary Policy Toolkit Strategy, launched in 2021, set a framework for the possibilities for the implementation of environmental sustainability considerations with regard to the application of the elements of the monetary policy instruments. In addition, the Charter of Sustainable and Responsible Investment, published in 2023, expresses the central bank’s commitment to integrating climate risk aspects into reserves management.
The MNB operates an environmental management system to green its own operations, where the target for the period 2023-2025 is to achieve a 75 per cent reduction in direct CO2-emissions. The MNB analysed the climate risk exposure of its financial assets along the two main risk categories (transition and physical risks), broken down by portfolios. The MNB analyses the risks with metrics commonly applied in international practice, supplemented by its own estimates and special analyses in certain asset categories.
The MNB exceeded its previous target, the carbon footprint per employee decreased by nearly 60 percent compared to the base by the end of 2022. The carbon intensity of the sovereign exposures of the foreign exchange reserves also decreased during 2023. In 2023, the climate impact of the dedicated green bond portfolio within the foreign exchange reserves is significant, the annual savings are roughly equivalent to the carbon footprint of a Hungarian municipality of 13 thousand inhabitants.
A key step in the systematic greening of the Hungarian financial system is the publication of the MNB’s climate-related financial disclosure, which the central bank plans to publish with annual frequency in the future as well.