The Magyar Nemzeti Bank has published a Charter of Sustainable and Responsible Investment to integrate sustainability considerations into foreign exchange reserves management as widely as possible. In the Charter, the Bank expresses its commitment to making reserves management more sustainable from an environmental point of view and sets medium and long-term objectives to green reserves management without conflicting conventional reserves management goals. In addition to being a compass for foreign exchange reserves investment strategy in integrating green considerations, the document can serve as an example for financial market participants and contribute to the development of the market.
In recent years, environmental sustainability considerations have also been assigned a prominent role in reserves management. In 2019, the MNB was one of the first central banks to decide to create a dedicated portfolio of green bonds, and since 2021 it has published the climate risk exposure of its asset portfolios annually in its Climate-Related Financial Disclosure (TCFD Report). However, managing climate risks inherent in financial portfolios is a complex task which requires a combination of different sustainable investment strategies.
In the Charter, the MNB sets out objectives and guidelines for reserves management based on four pillars: measurement, investment strategy, transparency/active engagement and monitoring. The MNB monitors relevant environmental sustainability factors, criteria and, where possible, integrates them into investment processes, bearing in mind the triple objective (liquidity-safety-return) of reserves management. Moreover, the commitments in the Charter include, in addition to the expected improvements in data quality and availability, a more comprehensive analysis of the climate impact of investing reserves and the active role the Bank plays in supporting market development. In the long term, the aim is to ensure that reserve portfolios are decarbonised as much as possible, while taking account of the primary targets and requirements of reserves management.
The specific way in which some elements of the Charter will be implemented will largely depend on future developments in data quality and availability. Accordingly, the MNB will closely monitor the development of sustainable and responsible investment practices, regularly review the commitments and objectives set out in the Charter, and, if necessary, supplement and amend them in the light of the changing market environment.