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The future of sustainable banking – interview with András Puskás, Deputy CEO of MBH Bank

The banking sector has a leading role to play in shaping our sustainable future. We spoke with András Puskás, Deputy CEO of MBH Bank, one of Hungary’s leading financial institutions about the bank’s ambitious journey towards sustainability, its strategic goals, achievements, and the pivotal role it envisions in contributing to Hungary’s decarbonisation goals.

Overall, how can climate change be viewed as both a potential threat and an opportunity for the banking sector?

The sustainability landscape, influenced by international and domestic guidelines, is reshaping the operational approaches of large companies, including banks. Clear and strict guidelines, driven by international agreements like the Paris Climate Agreement, are pushing businesses, including banks, to integrate ESG considerations into their operations. Recognising the strategic importance, companies, including those in banking, acknowledge that investing in ESG is vital for long-term competitiveness.

As regulations evolve, the banking sector must adapt and adopt ESG principles to navigate the dynamic business environment. MBH Bank, one of Hungary’s leading banking groups, plays a key role in supporting sustainable and climate change related investments.

Beyond the regulatory requirement, however, it is important for us to integrate sustainability into our daily operations, thus contributing proportionately to the achievement of domestic climate goals and the promotion of a greener economy.

MBH is now the leading financial institution in Hungary. What were the main challenges of the merger?

Achieving a triple bank merger of a scale and speed unprecedented in Europe, resulting in MBH Bank, is a significant achievement. The rapid launch of a comprehensive brand renewal focusing on customer interfaces is a testimony to the commitment to a unified brand experience.

The merger presented us with a number of challenges, as we had to integrate the ESG efforts of the predecessor banks into a single strategic framework, and the collection and harmonisation of data from each of the former member banks also required extra effort. At the same time, the momentum of the merger process has had an impact on our sustainability efforts and we have achieved significant milestones in a very short period of time.

We consider it important to provide an appropriate strategic framework for our existing and future initiatives. Therefore, new processes, structures, and strategies have been developed, providing the right momentum to prioritise and integrate sustainability into our daily operations. We believe that the merger, alongside its challenges, represents an irreversible competitive advantage. This is why we took steps to address sustainability issues during this period.

What were your biggest achievements in the field of sustainability and what are your next goals and ambitions?

Our goal, as defined in the ESG strategy, is for MBH Bank to be at the forefront of the domestic banking market in terms of sustainability. Sustainability, in this context, refers to adherence to the ESG approach, emphasising not only environmental impacts but also considering important social and corporate governance issues. Key social and corporate governance values for us include fostering a healthy workplace environment, promoting gender equality within our operations, respecting our clients, and ensuring the transparent and compliant operation of MBH Bank. The ESG strategy formulated in 2022 aims to outline a framework with detailed guidelines, action plans, metrics, and clear roles to achieve these objectives.

Our strategic goals, structured around five pillars, have yielded tangible results. Notably, our Net Zero Banking project calculates our greenhouse gas emissions (Scope 1 and 2) and aims to disclose Scope 3 emissions of our funded portfolio, a pioneering effort for a Hungarian-owned bank.

We recently earned an excellent B+ ESG rating from Refinitiv, with plans to secure two more ratings early next year from recognised ESG providers, CDP and Sustainalytics. The B+ rating reaffirms our commitment to sustainability, contributing not only to economic but also to social well-being and environmental protection. This achievement underscores our ambition to be a leading sustainable player in Hungary and validates the effectiveness of our strategies, providing momentum to drive positive change in the banking sector.

Specifically speaking of MBH’s ESG strategy, what are the key drivers behind it and how can you summarise the main aspects?

As the economic engine and financier, the banking sector plays a crucial role in advancing sustainability, a role that has strengthened in the past year or two during the transition. Financial institutions have a dual role: they must make their own operations sustainable, setting an example for the broader economy, and as deeply embedded entities in economies and societies, they possess the potential to drive significant change.

Our ESG Strategy aimed to create a vision, summarise sustainability initiatives by Member Banks, and identify new directions and specific tasks.

Aligned with our financial institution role, our ESG vision rests on two strategic objectives: to be a partner in clients’ sustainability goals and to raise awareness of sustainability issues among clients.

Simultaneously, as a company, we strive to make our internal operations sustainable by achieving decarbonisation, integrating ESG considerations, providing training, and ensuring the well-being of our employees.

How are the current external factors (geopolitical disruptions, lack of liquidity) affecting ESG priorities in the banking sector and for MBH?

According to KPMG’s analysis, conflicts in Europe are reshaping assumptions about the global economy, prompting banks to reconsider their ESG strategies. Three main opportunities and risks for the banking sector emerge: shortened value chains, beneficial for sustainability, clustering in nearby countries with shared values, requiring significant funding; the potential for increased digitalisation as value chains shorten, creating new investment needs; and the necessity for substantial investment in energy efficiency and renewable energy, with the financial sector playing a crucial financing role.

bankGeopolitical changes are not expected to alter the medium to long-term need for ESG transformation. In fact, these changes reinforce the benefits of implementing ESG aspects in the medium to long term. As MBH Bank, we consider these influencing factors while shaping our future plans to adapt quickly to any changes.

How do you see ESG regulations evolving in the short- to medium-term?

We see the EU Corporate Sustainability Reporting Directive (CSRD) transforming ESG reporting in the coming period. This is because starting from 2024, nearly 50,000 companies, including those outside the EU with subsidiaries in the EU or listed on EU-regulated markets, will be required to produce mandatory sustainability reports. The CSRD marks a new era in sustainability reporting and challenges established standards such as GRI and SASB. Companies will now also have to disclose non-financial information, for example, on water consumption, creating a new situation. Although the task is daunting, businesses have plenty of time to understand the legislation; only a limited number of companies will have to report in 2025, detailing their 2024 performance. Despite the challenges, collaboration and shared interpretive insights through education and conferences can help to prepare the report together.

What are your customers’ ESG priorities? And to what extent is MBH aligned with those?

With increasing regulatory guidance and growing consumer expectations for sustainable practices, companies urgently need to contribute to a more sustainable future. As investors incorporate ESG considerations into their decisions, sustainability will become a crucial factor in raising capital and ESG compliance will become a core requirement for bank financing. In the high-interest rate environment in Hungary, our bank is actively addressing ESG issues to invest in green lending. However, the introduction of green lending is a gradual process due to strict international and national regulations governing green activities, which require IT system development and policy development. In a recent project, we have assessed the ESG risks of the portfolio of former member banks, which indicates the first steps of green lending. The focus is on understanding where improvements in the portfolio are needed in a high-interest-rate environment. These efforts are aimed at raising awareness of the benefits of green finance and sustainable investments, which could potentially increase demand for such finance from customers.

How can MBH contribute to achieving Hungary’s decarbonisation goals?

In order to achieve the domestic decarbonisation targets, we have created a complex ESG program called “Bank for a Sustainable Future”, which was announced at the Budapest Climate Summit in early December last year. In the program, we make the following 3 key commitments that will underpin our future sustainability activities:

We are making our first commitment to biodiversity conservation. And in this context, we are delighted to announce that we are working with the Ministry of Agriculture to support 10 of our country’s national parks. The partnership will see us work together to develop comprehensive biodiversity conservation programs over the coming years that will help maintain healthy ecosystems.

MBH Bank’s commitment to decarbonisation is further strengthened by the second commitment of our program, to be the first Hungarian-owned bank to sign up to the internationally recognised Science Based Targets initiative in 2024, whereby we commit to validate our emissions reductions on an international, science-based basis.

The third commitment of the program will be related to green lending and green product development. We are committed to increasing the share of green credits by at least 4 percentage points by the end of 2024, and we will launch an intensive green product development program to support this.

Last year, we have prepared and published a Green Lending and Green Financing Framework, in line with national and international standards, to lay the foundations for our future green lending and green bond issuance activities. The objectives set out in the Framework include green lending for renewable energy, sustainable transport, sustainable real estate and sustainable agriculture projects.

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