In the region’s market, banks and institutional investors are responding to both regulatory obligations and evolving risk assessments linked to sustainability, the council says.

“Lenders are motivated by regulatory compliance, reputational considerations, and portfolio risk management,” says Zsombor Barta, founding partner of Greenbors Consulting, and a former HuGBC president. “Their influence over real estate actors is growing steadily, making them key enablers and gatekeepers of ESG adoption across the built environment in Hungary and the wider region.”

The class “A” RoseVille offices in Budapest, by the Belgium-based CEE regional developer Atenor, has become Hungary’s first commercial property to receive EU Taxonomy certification from an independent verifier, meeting the “climate change mitigation” requirements.

Consequently, the RV Real Estate Investment Fund, managed by Hermes Investment Management, the new owner of the 15,000 sqm office building, successfully acquired a green loan for the property.

“Thanks to the close cooperation between the MNB [National Bank of Hungary] and our organization, a well-defined framework for applying EU taxonomy requirements has emerged. Based on this, the HuGBC can provide independent verification for developers, as in the case of RoseVille,” comments Gábor Szarvas, the current president of the Hungarian Green Building Council.

“Environmental considerations are an integral part of Erste’s strategy and core operations,” says György Salamon, head of real estate financing at Erste Bank Hungary, in offering the lenders’ perspective.

“This means incorporating sustainability into all areas of activity to make the bank’s entire operation more sustainable. Erste’s goal is for 25% of its corporate loan portfolio to contribute significantly to the environmental objectives of the EU taxonomy by 2026. Erste now only finances real estate projects that significantly contribute to climate change mitigation,” he adds.

Lenders are under growing pressure from regulators, notably the European Central Bank, which has flagged commercial real estate as a systemic risk and urged banks to limit their exposure.

Increased Scrutiny

“This has translated into tighter lending standards, increased scrutiny of asset resilience, and financial incentives for performance-linked sustainability,” comments Hubert Abt, CEO and founder of Workcloud24. “Their motivations are clear: reduce portfolio risk, ensure borrower robustness, and stay ahead of regulatory scrutiny. It’s less about green labelling and more about future-proofing credit quality,” he says.

Thus, lenders are exerting pressure on developers and investors by linking financing terms to ESG performance. This can take the form of sustainability-linked loans, where interest rates are tied to the borrower’s ESG metrics, or through green loans, which are explicitly earmarked for sustainable assets.

According to international benchmarks, the investment costs of green buildings are, on average, 2-10% higher, but this green premium can pay off in as little as three to five years due to 25-50% lower energy and operational expenses. Sustainable buildings also depreciate more slowly, providing more stable long-term returns, says Barta.

He argues that, in the Central European real estate market, developers and investors face an increasing convergence of market and regulatory pressures that are shaping ESG-related business practices.

On the regulatory side, the most significant driver is the EU’s evolving ESG framework, including the Corporate Sustainability Reporting Directive (CSRD), the EU taxonomy for sustainable activities, and the European Sustainability Reporting Standards (ESRS).

“These regulations require not only transparency in environmental and social impacts, but also a demonstrable alignment of business strategies with long-term sustainability goals,” Barta explains.

“For developers and investors operating in or financing projects within the EU, compliance is no longer optional; it is becoming a legal and reputational necessity. In Hungary, while enforcement is still evolving, market actors are increasingly aware that alignment with EU rules is essential to access both institutional financing and public procurement opportunities,” he adds.

Improved Ratings

At the same time, financial institutions are increasingly judged by their own ESG performance, both by shareholders and regulators. Offering sustainable finance products improves their own sustainability ratings and helps them align with their institutional commitments to decarbonization.

In many cases, ESG pressures are now being internalized as core business drivers. Energy efficiency, climate resilience, and regulatory compliance have a direct impact on property value, occupancy rates, financing terms, and asset liquidity. For institutional investors and international developers active in the region, ESG is integral to long-term competitiveness and license to operate.

However, there are still perceived gaps. In parts of the market, especially among smaller developers or in lower-value asset segments, ESG is often seen as a compliance obligation or a cost burden, rather than a value-enhancing opportunity. This can be attributed to limited regulatory enforcement, knowledge gaps, or a perceived lack of return on sustainability investments. In these cases, ESG and business pressures are not yet fully aligned, in the view of Barta.

ESG considerations already play a critical role in shaping investment decisions, particularly for core products where ESG compliance directly influences both transaction viability and financing availability. For institutional investors, lenders, and tenants, adherence to sustainability standards has become a baseline requirement, according to Ferenc Furulyás, managing director of iO Partners Hungary.

“However, in the current environment, marked by a shift toward higher-yielding, value-add opportunities, ESG is often viewed more as a future implementation goal than an immediate prerequisite. In these cases, the feasibility of upgrading assets to meet ESG standards is more relevant than their current certification status. As a result, non-core investors are increasingly assessing ESG potential as part of their value creation strategy, rather than as a starting condition,” he adds.

Investors, developers, and owners are increasingly supported by expert designers, consultants, and now also financial partners, whether it’s about compliance, certification, or financing structures.

Experts agree that the real estate market of the future will gradually split into two categories: sustainable, future-proof properties on the one hand, and so-called “stranded assets,” which will lose value, on the other. Greening existing portfolios will become inevitable, especially for institutional owners. Those real estate players who recognize and adapt to these trends in time will gain a competitive edge, while others may be pushed to the margins by shrinking demand, concludes the HuGBC’s Szarvas.

This article was first published in the Budapest Business Journal print issue of September 5, 2025.