Following the Monetary Council’s decision, the size of the dedicated green bond portfolio in the Bank’s foreign exchange reserves will be doubled to EUR 500 million. With this decision, the Magyar Nemzeti Bank further promotes environmental sustainability, in line with international best practices and the Bank’s green mandate. The increase in holdings of green bonds will have a real, short-term positive environmental impact. With its decision, the MNB, as an opinion leader among economic agents, is increasing market participants’ awareness of the importance of sustainable finance.
Mitigating the negative impacts of climate change is one of the key tasks of our time. In 2019, the Magyar Nemzeti Bank started to build up its own dedicated green bond portfolio, making it one of the first central banks to embed environmental sustainability considerations into its reserves management. With the green bond portfolio, the MNB is an active participant in the market segment supporting sustainable growth, while keeping its primary tasks of reserves management (liquidity, safety, return) in mind to the maximum. The portfolio is consistent with the recommendations of the Network for Greening the Financial System, the main international central bank forum in which the MNB participates, and is also a sign of the MNB’s commitment to international cooperation.
The portfolio may include so-called ‘green-labelled’ bonds complying with international green standards and general rules on reserves management, where the funds raised by the issuer are used to finance specific ‘green’ investment projects that are beneficial from an environmental and energy efficiency point of view. The risk-return characteristics of the portfolio do not differ significantly from similar types of investments. Its size represents a small proportion of foreign exchange reserves, and therefore has no material impact on the financial performance of and risks associated with reserves management. While managing the portfolio, the MNB aims to reflect as closely as possible the structure of this market segment.
The doubling of the target level of the dedicated green bond portfolio to EUR 500 million at market value is in line with the Bank’s statutory objectives, which directly and indirectly include supporting environmental sustainability. The Bank’s primary mandate also provides an opportunity to address climate change, and since 2021, sustainability aspects have been explicitly included in the MNB’s mandate via an amendment to the Central Bank Act. Increasing the amount of green bonds held also fits into the MNB’s Green Programme, which aims to reduce risks related to climate change and other environmental issues, expand domestic green financial services, increase the related knowledge base and further reduce the ecological footprint of financial participants and the Bank itself.