Budapest, 22 January 2021 – The central bank published a study and discussion paper focusing on the challenges and opportunities for the financing of the Hungarian renewable energy sector. The MNB's newly introduced preferential capital requirements for green corporate financing may also help the development of this sector.
The Magyar Nemzeti Bank (MNB), within the framework of its Green Program, set the goal of improving the domestic green financing environment and promoting climate-friendly corporate financing. The starting point of the study published now, titled “Financing the Hungarian Renewable Energy Sector: Challenges and Opportunities”, is Hungary's new national energy strategy which envisages an ambitious expansion of the country’s renewable energy capacity.
According of the strategy, by 2030 the current approx. 3 gigawatts of renewable energy capacity will increase to over 7 gigawatts and, by 2040 to over 13 gigawatts, largely due to newly installed photovoltaic solar power plants. The MNB estimates that the capacity expansion of this magnitude will translate to at least HUF 2,000 billion in investment and HUF 1,500 billion in debt financing by 2040 in the aggregate.
Due to the transition risk related to the climate change, the MNB considers it desirable that commercial banks increase the share of environmentally sustainable industries, such as the renewable energy industry, in their balance sheets. From the point of view of financial stability, however, it is essential that this transformation takes place with the least possible micro-prudential risk (credit, interest rate, liquidity, etc.).
After a comparative presentation of the Hungarian renewable energy support schemes (KÁT, METÁR), the central bank study explores and illustrates the current investment and financing landscape with statistical data. The paper also presents the financing and investment constraints identified during the MNB's consultations with stakeholders, commercial banks and market participants, and analyses the bankability challenges arising from the current support system.
In response to these constraints, the central bank is also examining the potential policy interventions. To this end, it has introduced preferential capital requirements for green corporate financing, which will improve the financing environment for renewable energy production.
With this study, the MNB intends to address and invite for discussion a wide range of stakeholders in the field of renewable energy – financiers, regulatory institutions, investors, industry and non-governmental organizations, and last but not least the domestic and international professional community interested in the topic.
The study can be accessed here: Financing the Hungarian Renewable Energy Sector: Challenges and Opportunities
Magyar Nemzeti Bank