Green Finance: Insight, Initiative and Impact in Hungary

Rácz Kata Krisztina (2024) Green Finance: Insight, Initiative and Impact in Hungary. Külkereskedelmi Kar.

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Absztrakt (kivonat)

The evolution of the green finance market over time has been shaped by various factors, including environmental challenges, economic opportunities, and regulatory pressures. Initially emerging in response to concerns about the environmental impact of financial activities, green finance has gained traction, particularly since the late 1980s and early 2000s. This evolution has been marked by a shift in focus from traditional banking practices to sustainable finance, with multinational banks increasingly incorporating sustainability into their operations to comply with regulations and meet public expectations. The market for green finance has also been influenced by international agreements and goals, such as the Sustainable Development Goals and the Paris Agreement, which have catalysed efforts to mobilize funds for climate and environmental objectives. Moving forward, the transition towards a sustainable financial system holds the potential for amplifying investment in green projects. Key drivers of this transition include financial policies and regulations, responsible engagement in fiscal policy, and public involvement at both national and international levels. To further promote green finance, monitoring and disclosure of financial flows within green projects, along with measures such as reducing interest rates and implementing target-driven lending, are essential to attract private sector financing and investment. The key characteristics and trends in green finance, specifically green bonds, loans, and mortgages, showcase a growing market aimed at funding environmentally sustainable projects and addressing climate change. Green bonds, introduced in 2007, have witnessed significant growth, with various entities issuing them to finance green initiatives such as renewable energy and green infrastructure. Green loans, similar to green bonds but with smaller loan amounts, also contribute to funding environmentally responsible projects. Green mortgages allow homeowners to finance environmentally impactful projects, offering advantages such as lower interest rates and potential cost savings on utility bills. Advantages of green finance instruments compared to traditional ones include the promotion of sustainability and alignment of financial objectives with environmental goals. Green bonds and loans adhere to standards set by organizations like the ICMA and the European Union, ensuring transparency and integrity. Green bonds attract investors interested in sustainable investing, leading to a slightly lower return compared to traditional bonds but with high sustainability goals. Moreover, the transparency provided by reporting standards allows investors to assess the environmental, social, and governance impact of their investments. However, the disadvantages of green finance instruments include the additional documentation required, such as green bond frameworks, and obtaining green certification can inflate the pricing of green bonds relative to conventional ones, potentially hindering market expansion. Green mortgages require more paperwork, such as home energy assessments, and while they offer long-term savings, accrued interest may diminish these savings. In light of Hungary's commitment to climate protection and sustainability outlined in Act XLIV of 2020 on climate protection, as well as subsequent amendments, the implementation of green finance programmes presents both challenges and opportunities. These initiatives, spearheaded by entities such as the Magyar Nemzeti Bank (MNB) and the Government Debt Management Agency of Hungary (ÁKK), aim to align financial activities with environmental objectives and stimulate investment in green projects. One of the primary challenges lies in the need to enhance public awareness and participation in green finance programmes. Despite efforts such as the Family Green Finance initiative and the Green Finance Product Finder service, there remains a necessity to bolster consumer knowledge and confidence in green financial products. Additionally, the lack of explicit regulations mandating green bond issuance and impact reporting underscores the importance of voluntary adherence to sustainability standards by issuers. Moreover, while the Green Home Programme and Solar Panel Plus Programme offer incentives for energy-efficient housing and renewable energy adoption, certain limitations and complexities hinder widespread adoption. Concerns over the long-term viability of solar panel investments, variability in energy production, and challenges in recycling and disposal underscore the need for comprehensive strategies to address these issues. However, amidst these challenges lie significant opportunities for Hungary's sustainable development and economic growth. Increased issuance of green bonds not only attracts foreign investment and diversifies funding sources but also fosters the growth of the domestic bond market. Furthermore, initiatives like the Green Home Programme not only stimulate demand for energy-efficient housing but also contribute to the country's goal of reducing energy consumption. This thesis contributes to the theoretical understanding of green finance by defining its scope, exploring various instruments, and analyzing their advantages and disadvantages within the Hungarian context. The findings of the primary research survey shed light on various aspects of green finance awareness and preferences among the Hungarian population, indicating a mixed level of awareness among respondents. While certain programs, such as the Solar Panel Plus Programme, enjoy relatively high recognition, others, like Hungarian sovereign green bonds, are less known. This suggests that awareness levels vary across different green finance initiatives, with demographic factors such as age and education influencing awareness levels. Contrary to Hypothesis 1, which presumed a lack of awareness among the public regarding green finance programs, the findings show a significant level of awareness, albeit varying across different programs. However, the utilization rates of these programs remain relatively low, indicating potential barriers to participation despite awareness. Regarding the factors influencing individuals' decisions to invest in green finance opportunities, both financial and environmental considerations play significant roles. Financial factors such as yield and interest are highly important to respondents, suggesting a strong focus on financial benefits. However, environmental factors, particularly those related to household energy consumption and achieving a greener lifestyle, also hold considerable importance. Thus, Hypothesis 2, which posited that individuals prioritize green finance instruments primarily for financial benefits rather than environmental ones, is only partially supported by the data. Further analysis based on gender and age demographics reveals nuanced perspectives. While both men and women prioritize similar financial and environmental factors, slight variations exist in their rankings. Similarly, while younger generations prioritize financial factors slightly more than older generations, both age groups rank environmental factors, with older generations showing a slightly higher preference for environmental considerations. Contrary to Hypothesis 3, which suggested that younger generations would prioritize environmental benefits more than older generations, the data suggests that older generations rate environmental factors higher than younger generations, particularly in terms of reducing energy consumption and achieving a greener lifestyle. Thus, the hypothesis is rejected based on observed data trends. The research highlights the importance of considering both financial and environmental factors in understanding individuals' attitudes towards green finance opportunities. While financial considerations remain significant, environmental concerns also play a crucial role in decision-making. Moreover, demographic factors such as age and education level can influence awareness and preferences regarding green finance, emphasizing the need for targeted outreach and education initiatives to promote sustainable financial practices among diverse demographics in Hungary. The insights acquired from the primary research survey highlight the practical significance of considering both financial and environmental factors in designing and promoting green finance products, emphasizing the need for targeted educational campaigns and outreach efforts tailored to different demographic segments within the Hungarian population. While this study has provided valuable insights into the situation of green finance in Hungary, it is crucial to acknowledge its limitations. It is important to recognize that the findings of this study may be subject to interpretation and influenced by my perspectives, despite efforts to maintain objectivity. Future research endeavours should aim to expand the sample size to address the low utilization rates and possible reasons behind it and to develop strategies for enhancing public participation and awareness. Moreover, future research could assess the long-term effectiveness of green finance initiatives in Hungary in achieving the country’s environmental goals by examining their impact on environmental outcomes, financial stability, and social equity over time.

Intézmény

Budapesti Gazdasági Egyetem

Kar

Külkereskedelmi Kar

Tanszék

Nemzetközi Kereskedelem és Logisztika Tanszék

Tudományterület/tudományág

NEM RÉSZLETEZETT

Szak

Nemzetközi gazdálkodás

Mű típusa:	diplomadolgozat (NEM RÉSZLETEZETT)
Kulcsszavak:	awareness, green bond, green finance, green loan, green mortgage, Hungary, MNB, Napelem Plusz Program, sustainability, Zöld Otthon Program
SWORD Depositor:	Archive User
Felhasználói azonosító szám (ID):	Archive User
Rekord készítés dátuma:	2024. Szep. 26. 07:58
Utolsó módosítás:	2024. Szep. 26. 07:58

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