The Magyar Nemzeti Bank (MNB) is among the first central banks and domestic financial institutions to publish its Climate-related Financial Disclosure (TCFD). The aim of the report is to identify, measure and publish climate risks related to the MNB’s operational activities and financial instruments as widely as possible and in a transparent manner, thereby providing guidance to the participants of the domestic financial sector.
Achieving environmental sustainability is one of the biggest challenges of the 21st century. It has become clear that it is no longer possible to force economic growth at the expense of nature. As climate change has implications for price stability, financial stability, and sustainable development, it is an issue that central banks need to address as a matter of priority.
We are convinced that a green transition is inconceivable without measurement, as transparency is a fundamental condition for environmental sustainability, both in terms of the starting point and of measuring the impact of the actions taken. Given the importance of the financial sector, the MNB, as the monetary and financial supervisory authority, has a key role to play in this respect. Since the summer of 2021, it has been explicitly stated in the Act on the Central Bank that the MNB supports the achievement of environmental sustainability, while the price stability objective is the primary objective. The MNB’s first comprehensive climate-related financial disclosure was prepared in this spirit, the main motivation of which was to review the operations of the central bank, to assess the climate-related risk of the central bank’s balance sheet, to support international practice and to set an example for domestic financial and public institutions.
In preparing the disclosure, the MNB relied primarily on the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) established by the G20 Financial Stability Board. The TCFD recommendations provide guidance on the climate-related risk reporting along the four main pillars of organisational functioning—internal governance, strategy, risk management and metrics and targets—and are followed by the MNB’s report. In its report, the central bank analysed the climate risk exposure of financial asset portfolios according to the two main climate-related risk categories, namely transition and physical risks, broken down by portfolios, using indicators commonly used in international practice, supplemented by its own estimates and forward-looking analysis for some asset categories. When measuring climate risks, the MNB reviewed and used existing central bank examples and practices, in addition to international recommendations, and also took into account the specificities of its own financial asset portfolios.
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 annually, encouraging domestic financial and public sector actors to follow suit.
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