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Banking sector key to sustainability - EY report

Banking

According to research by Big Four company EY, European banks are among the world’s leaders on sustainability; with the 10 largest players committing to providing nearly USD 1.5 trillion of green finance by 2030 last year.

EY monitored more than 200 ESG-related disclosures, captured by third-party data aggregators from annual reports and other publicly available sources, for more than 1,100 financial services firms worldwide, reviewing the breadth and depth of each institution’s disclosure against these individual parameters, which have been grouped into 25 categories under the three environmental, social and governance pillars.

The company took a look at the activities of more than 1,100 financial institutions worldwide. While the 10 largest institutions on the European continent committed to providing a massive amount of green finance, there are only a few entities that have completely integrated ESG criteria into their operations.

Environmental disclosure rates and ESG scores are the lowest of the three key ESG components in the case of European institutions, averaging 44%.

Social disclosure rates are stronger than environmental ones, EY notes. Disclosure rates for the 68 European banks average 55% across the Index’s 66 social parameters, compared with a global figure of 40%.

Governance performance is the strongest ESG component, with an overall European disclosure rate of 70% compared with 65% worldwide. 

MNB’s “Green Finance Report” an incentive for Hungarian financial sector

The National Bank of Hungary (MNB), recognizing that relevant EU regulations will only come into force years into the future, released its first-ever “Green Finance Report”, looking to "improve transparency" and "strengthen market awareness", supporting a more accurate understanding of the financial aspects of climate changes by financial market insiders and other stakeholders in society.

Results of a banking sector survey included in the report suggest green aspects "have clearly strengthened in recent years", but Hungary's banking sector is "still seriously falling behind...euro area peers".

MNB also noted in the report that the top management at 68% of Hungarian banks "do not discuss climate risks", compared to a 25% average across the European Union.

"Serious improvement is needed for the Hungarian banks to be able to assess the volume and quality of their exposures, and to be able to take effective risk mitigation steps and prioritize sustainable financing," it added.

“I think the MNB's recommendation plan could act as an excellent incentive,” said János Hoós, head of EY Hungary’s financial advisory team. “In addition, there is a social expectation related to COVID that banks should be involved in recovery and helping their customers. The sector is at the beginning of the road. The key to achieving these goals is credible performance indicators and uniform application of legislation.”


 

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