July 13, 2024

Housing Finance Development

It's Your Housing Finance Development

Green Financing In CEE – Commodities/Derivatives/Stock Exchanges

Sustainability is expected to soon become a cornerstone of the
regulatory environment. The non-financial aspects of an investment
will be increasingly emphasised during the decision-making process.
Greenwashing will no longer be enough; environmental and social
aspects will truly matter as investors and society turn their
attention to them. This will challenge how the lending sector
operates and it must prepare for the transition as soon as
possible. This overview aims to shed light on the government and
regulatory programmes in the CEE-SEE region, to smooth the
transition by making the investments more attractive and
profitable.

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Please click here to view interactive map

Is there any “green bank” initiative in your
jurisdiction?

Austria

Yes.

Green Finance Alliance: The Austrian Federal
Ministry for Climate Action, Environment, Energy, Mobility,
Innovation and Technology launched the Green Finance Alliance, an
initiative aimed at establishing a sustainable financial market in
Austria. Its members are financial institutions who aim to achieve
climate neutrality by 2050.

Bulgaria

No.

There is no local initiative by the Bulgarian regulator of the
banking sector – the Bulgarian National Bank. Nevertheless, the
Bulgarian Development Bank, whose sole owner is the Bulgarian
state, aims to help small and medium-sized enterprises in this
aspect, as the Strategy of the Bulgarian Development Bank for the
2021-2023 period envisages 20 % of the new loans to be green
(compliant with ESG) -
https://bbr.bg/en/news-bbr/bdb-will-help-small-companies-green-transition/

Croatia

No (at this point).

There is no “green bank” initiative by the Croatian
National Bank (the CNB) yet. However, at the start of November
2021, the CNB made a public “Climate Pledge” in which
(given its mandate, instruments and resources) it declared its
determination to strengthen its catalytic role in fostering climate
transition in Croatia. In that respect, the goals of the CNB
include: (i) building and enhancing its staff’s skills and
knowledge on the impact of climate change on the CNB’s main
goals; (ii) developing and subsequently implementing its own
climate strategy and allocating adequate resources to address
climate-related and environmental risks in different policy areas,
especially in the area of financial stability, supervision,
research, monetary operations and foreign reserves management;
(iii) incorporating climate-related and environmental risks into
supervisory expectations in line with the ECB’s Guide on
climate-related and environmental risks; (iv) engaging in regular
open dialogue with credit institutions in order to encourage them
to incorporate climate-related and environmental risks into their
risk management frameworks and decision-making processes; (v)
supporting the establishment of a workstream within the Vienna
Initiative charged with exploring how it can assist credit
institutions in adapting to climate transition and transforming
economies in line with European climate goals; and (vi) formulating
an action plan by the end of 2022, aimed at reducing its own carbon
footprint in line with the Paris Agreement objective of limiting
global warming to 1.5 degrees Celsius. This last action plan was
not yet published, presumably because Croatia is entering the
eurozone in 2023 and the CNB is converging its policies with the
ECB.

Czech Republic

Yes.

In the first quarter of 2021, 16 members of the Czech Bank
Association signed a Sustainable Finance Memorandum. The Memorandum
binds the members to minimise the impacts of their operations on
the environment, to continue to digitise and transition to
paperless procedures, to cooperate with public authorities, to exit
loan portfolios associated with production that is excessively
harmful to the environment or human health or to offer services and
green finance products (obligations, mortgages or loans)
contributing to sustainability.

Hungary

Yes.

In April 2021, the Hungarian National Bank issued a Green
Recommendation to encourage Hungarian credit institutions to modify
their operations towards sustainability, including strategy making,
corporate governance, risk management, etc.

Poland

No.

The Polish legislation does not define a “green bank”,
but there are numerous governmental projects in which the presence
of a bank is important. An example of such a project is the
“Clean Air Programme” created by the Ministry of Climate
and Environment. Banks were invited to apply to participate in the
programme, which resulted in the launch of a new banking pathway
entitled “Green Bank”. “Clean Air Credit”. The
project concerns subsidies for the replacement of heat sources up
to a certain amount for owners of single-family houses and
dwellings in municipalities that fall under the so-called anti-smog
law.

Romania

No.

Apart from the EU initiatives, no specific Romanian green bank
initiatives exist.

Serbia

No.

So far, there have been no “green bank” initiatives in
Serbia. However, in 2021, the National Bank of Serbia (NBS) became
a member of the global Network of Central Banks and Supervisors for
Greening the Financial System (NGFS). The NBS has declared its
support for scaling up green finance in Serbia and for
transitioning toward a sustainable economy. Meanwhile, major
commercial banks in Serbia have sustainability and green financing
high on their agenda, evidenced by ever-growing volumes of green
and sustainability-linked lending in Serbia.

Slovakia

Yes.

In October 2021, six members of the Slovak Bank Association
signed a Sustainable Finance Memorandum that binds members to
actively cooperate with the competent authorities to implement
standards and procedures for achieving energy efficiency targets
for buildings within the meaning of the European Green Deal, to
apply sustainability principles in their business activities and
relationships, to initiate the creation of a sector standard for
ESG certification of corporate clients, and to offer services and
green financial products, investment products or loans contributing
to sustainability so that sustainable finance is accessible.

Slovenia

No.

Apart from the EU initiatives, no specific Slovenian green bank
initiatives exist.

Is there a regulatory, financial or legal incentive to
financing green projects by lending?

Austria

Yes.

Austrian Green Investment Pioneers Programme:
The Austrian Federal Ministry for Climate Action, Environment,
Energy, Mobility, Innovation and Technology implemented the
Austrian Green Investment Pioneers Programme as a part of the
klimaaktiv climate protection initiative. Participants
gain support when looking for financing for their climate-relevant
business ideas in the area of renewable energy, energy efficiency,
mobility and agriculture/bioeconomy. Lenders are encouraged to
participate as financiers in the network.

Bulgaria

No.

There is no local legal or regulatory incentive related to
financing green projects, e.g. related to interest premiums or
capital reliefs

Croatia

No.

There are no regulatory, financial or legal incentives
specifically to finance green projects by lending. However, credit
institutions in Croatia have broadened potential credit lines to
green projects, raising awareness of the Corporate Sustainability
Reporting Directive and obligations provided therein.

Czech Republic

No.

There are no regulations or incentives issued by the Czech
legislator or the Czech National Bank. Some banks provide EKO loans
and help with submission of applications to the New Green Savings
subsidy programme. However, those banks are not in any way
officially connected to the programme.

Hungary

Yes.

Hungarian banks can apply a significantly reduced capital
requirement for loans financing the purchase and construction of
energy-efficient properties. It also covers solar power plants,
sustainable agriculture, energy efficiency and electromobility. The
capital discount is 5 % or 7 % of each eligible gross exposure,
which reduces the Pillar II capital requirements of the
participating institution.

The Green Home Programme was launched during the summer of 2021
by the Hungarian National Bank. Under this programme, the MNB
provides refinancing to banks financing the construction and
purchase of green homes.

Poland

Yes.

As a rule, the state does not offer any legal or financial
benefits to the banks. The government, however, tries to direct and
motivate society to pay more and more attention to environmental
issues. For several years now, the Institute for Responsible
Finance and the UN Global Compact Network Poland, together with the
Ministry of Finance and the Ministry of Funds and Regional Policy,
have been creating a project called “Green Finance”, a
report that outlines the goals and challenges of green finance. Its
main objective is to outline the situation of sustainable
development in Polish society and in the economy, urging banks and
defining the goals they should meet. It is not only a statement by
government bodies, but also representatives of the biggest Polish
banks (e.g. PKO Bank Polski and mBank) have included their views on
the situation of “green finance”. Although the state does
not offer specific benefits to the banks, the banks themselves are
accommodating in terms of lowering interest rates on green loans
(e.g. loans for building a house with documented low energy
consumption) or offering a better margin. This is an increasingly
common practice in the banking market and more and more banks are
opting for such measures (e.g. Credit Agricole or PKO BP).

Romania

Yes and No.

While there are no specific financial incentives to financing
green projects by lending, there are legal/regulatory requirements
for credit institutions to develop and comply with an appropriate
credit risk strategy which should address environment, social and
governance risks, among others. Furthermore, the National Bank of
Romania (NBR) is closely monitoring the financing of green projects
on the Romanian market and in 2020 became a member of the Network
for Greening the Financial System (NGFS). The NGFS aims to improve
the analytical framework and management of climate-related and
environmental risks and to increase the role of the financial
system in financing the transition toward a sustainable economy. To
this end, the NGFS defines and promotes best practices to be
implemented within and outside membership of the NGFS and conducts
or commissions analytical work on green finance.

Finally, most Romanian credit institutions have added in their
agenda and are actively marketing ESG-related projects, while the
market has seen an increase in actually implemented/financed green
investments.

Serbia

No.

Not at present. The significant impetus is expected to come
under the ambitious Green Agenda for the Western Balkans and
various EU-supported financing instruments yet to be employed in
the region.

Currently, the multilateral development banks – such as EBRD
through its Western Balkans Sustainable Financing Facility, Green
Economy Financing Facility, and similar programmes – are supporting
commercial banks in Serbia by granting them funds to be lent and
invested in energy efficiency and renewable energy projects.

Slovakia

No.

For the time being, there are no regulations or incentives
issued by the Slovak legislator or the Slovak National Bank. Some
banks offer eco-loans and eco-mortgages and there are a couple of
projects ongoing that offer support for green projects (with a
particular focus on housing), such as the Sustainable Energy
Finance Facility in Slovakia (a sustainable energy financing
facility developed by EBRD, which is co-funded by the Ministry of
Environment of the Slovak Republic and the Ministry of Agriculture,
Food and Environment of Spain and provides a credit line of up to
EUR 100m to Slovak commercial banks) or the GreenDeal4Buildings
(Horizon 2020)

Slovenia

Yes.

For the time being, there is no regulatory or legal incentive,
but there is a financial incentive to financing green projects by
lending in Slovenia. SID Bank (a development and export bank owned
by the Republic of Slovenia) adopted the SID Green Bond Framework
in November 2018 to issue green bonds to finance and/or refinance
loans granted to projects in the fields of environment protection,
ensuring proper waste management, proper consumption of natural
resources, increasing investments in environment protection
infrastructure, encouraging the use of renewable energy sources and
encouraging efficient energy use. SID Bank funds eligible projects
by granting loans, by other types of financings (e.g. purchase of
receivables) or investing into green bonds.

Are green bonds encouraged or incentivised in your
jurisdiction? (by means of guidelines, interest premiums, capital
reliefs, etc.)?

Austria

Yes.

Vienna Stock Exchange ESG Segment: The Vienna
Stock Exchange provides a market segment devoted exclusively to
sustainable bonds: the Vienna ESG Segment. The admission principles
are based on the International Capital Market Association’s
Principles.

Bulgaria

No.

Croatia

No.

There are no such instruments with respect to any encouragements
or incentive towards green bonds. In that sense green bonds are
heavily relied upon in the market in general and to the interest of
investors. Only one green bond has been issued so far in Croatia
and it has attracted great interest from investors. So new green
bonds are to be expected in Croatia.

Czech Republic

No.

Hungary

Yes.

The MNB issued a guideline setting forth the main green bond
standards, providing issuers with a to-dos list and stipulating the
necessary documentation and reporting obligations. The Budapest
Stock Exchange also supports the development of the green bond
market by issuing ESG Reporting Guidelines presenting the content
and format standards used internationally and providing practical
help in preparing ESG reports. In addition, the MNB launched a
Green Mortgage Bond Purchase Programme for the purchase of
green-rated mortgage bonds to promote green housing lending.

Poland

Yes.

State bodies set certain targets in sustainability reports, e.g.
“Green Finance” or the “Capital Market Development
Strategy”, which devote an entire chapter to sustainable
finance. One of the most important pieces of legislation drawn up
by the Ministry of Finance is the “Green Bond Framework”,
which mirrors the Green Bond Principles by ICMA on the Polish
scene. It indicates the courses of action and the requirements to
be met by banks.

The Warsaw Stock Exchange implements the Green Bond Principles
by working with the International Finance Corporation and some law
firms. As part of the Polish Green Bond Framework programme, the
IFC offers free assistance in proper reporting, preparation of
green bond documentation or training in this area.

Romania

Yes and No.

As previously mentioned, no specific Romanian financial
incentives have been implemented. However, ESG projects are
monitored and encouraged by the market in general and by NBR in
particular, and several green bonds issuances have been implemented
in Romania during the past two years.

Serbia

Yes and No.

Green bonds are encouraged as part of a wider effort by the
Government of Serbia to deepen Serbia’s capital markets (which
remain relatively shallow to date). Save for the general
endorsement of green bonds under the Government’s “Capital
Market Development Strategy for the period 2021-2026”, no
concrete incentives have been presented yet.

A market segment that operates comparatively better is the
sovereign bond market. In August 2021, the Government of Serbia
issued the Green Bond Framework, applicable to sovereign bonds. In
September 2021, the Republic of Serbia issued its first EUR 1bln
green bond, for financing its green agenda.

Slovakia

No.

There is no incentive in terms of guidelines or interest
premiums. Some banks have already issued green bonds.

Slovenia

Yes.

Currently, Slovenian legislation does not expressly
encourage/incentivise the use of green bonds. However, SID Bank
incentivises the use of green bonds by investing into eligible
green projects which are in accordance with the SID Green Bond
Framework.

Furthermore, the Treasury of the Republic of Slovenia adopted
the Slovenian Sustainability Bond Framework (SSBF) in 2021 to fund
government investments that contribute to Slovenia’s
environmental and social goals and promote the development of the
domestic and international green bond market.

Are the eligible criteria of green projects identified by the
GBP (green bond principles) in your jurisdiction? What are the main
elements of the GBP?

Austria

N/A

Austria has no national green bond principles in the narrower
sense. Therefore, usually international guidelines are used, such
as the Green Bond Principles published by the International Capital
Market Association.

Ecolabel for Sustainable Financial Products: Already in 2004,
the Austrian Federal Ministry for Climate Action, Environment,
Energy, Mobility, Innovation and Technology created an Ecolabel for
Sustainable Financial Products (the first of its kind in Europe).
Bonds can get a certification with the Austrian Ecolabel if
projects financed via those bonds are pursuing climate projection,
adaption to climate change, sustainable use and protection of water
and marine resources, etc

Bulgaria

No.

The EU Taxonomy Regulation is directly applicable in Bulgaria,
but apart from that no other relevant domestic laws for green
projects are in place.

Croatia

No.

Czech Republic

No.

Hungary

Yes.

The first corporate green bond issuance took place in the summer
of 2020 under the MNB’s Bond Funding for Growth Scheme. This
issuance of HUF 30bln marks the kick-off for the Hungarian
corporate green bond market and has been followed by more green
bonds issuances by several other companies. The issued bonds are
all compliant with the corporate Green Bond Framework, which has
been validated by external reviewers in line with international
standards (Green Bond Principles). Therefore, the
Hungarian GBP is equivalent to the 2014 ICMA (International Capital
Market Association) Principles. Nevertheless, the Hungarian Green
Bond Framework was introduced in May 2020. The Ministry of Finance
in cooperation with the Government Debt Management Agency of
Hungary has set-up a Steering Committee. The GBP include use of
proceeds, overall investment eligibility, reporting of total
inflows, management of inflows and impact reporting.

Poland

Yes.

The Green Bond Framework drafted by the Ministry of Finance
addresses the key criteria recognised by the 2018 Green Bond
Principles. These include the use of inflows in the form of budget
allocations, grants or projects (including their evaluation and
careful selection), management of inflows and detailed reporting,
including the reporting of the total amount of allocated inflows,
the balance of remaining funds and the translation of green
projects from each qualified sector. The above criteria are also
implemented in the strategies of Polish banks, e.g. BOS Bank, which
has included ESG-related reporting (opportunity analysis and good
governance) in its strategy.

Romania

No.

No specific Romanian legislation has been enacted. In practice,
general EU-level guidelines are considered.

Serbia

Yes.

The Green Bond Framework applicable to sovereign bonds is
aligned with the Green Bond Principles (2021), published by the
International Capital Market Association focusing on the use of
proceeds, process of expenditure evaluation and selection,
management of proceeds and reporting.

Slovakia

No.

Aside from the EU Taxonomy Regulation and general EU guidelines,
Slovakia has not adopted any eligible criteria of green
projects.

Slovenia

There is no legal act prescribing the criteria for green
projects. However, the SID Green Bond Framework implements the ICMA
GBP. For each issuance of SID green bonds, the use of proceeds,
project evaluation and selection, management of proceeds, reporting
and external review will be adopted in accordance with the SID
Green Bond Framework.

Also, the SSBF Bond Framework has been prepared in accordance
with the ICMA GBP, Social Bond Principles and Sustainability Bond
Guidelines. It is based on four core components: (i) use of
proceeds; (ii) project evaluation and selection process; (iii)
management of proceeds; and (iv) reporting. It is also based on two
key recommendations: framework publication and external revie

Is there any peculiarity that you may want to share about green
financing in your jurisdiction?

Austria

Austrian Climate and Energy Fund: In 2007, the Austrian Federal
Government created the Climate and Energy Fund, which provides
financial support to researchers and enterprises who are active in
the sustainability sector.

Austria’s position on the EU Taxonomy Regulation: Austria
supports the EU Taxonomy. However, the Federal Ministry for Climate
Action, Environment, Energy, Mobility, Innovation and Technology
holds the view that technologies such as nuclear energy and fossil
gas cannot be classified as green.

Croatia

In several public occasions, the board of Hanfa (Croatian
Financial Services Supervisory Agency), who as a regulator approves
the green bond prospectus, stated that Hanfa is especially careful
about potential greenwashing and warned potential issuers of green
bonds to specifically elaborate all the green factors of the
bonds.

Poland

Although Poland was the first country in the world to
successfully issue green treasury bonds six years ago, this did not
lead to significant growth in the market. The Ministry of Finance
has made public statements about Poland’s strong potential for
green bonds, but roadblocks (in the form of limited funding for
green projects) have been encountered every step of the way. The
crucial point is that the Polish bond market is small when compared
to Western European or Scandinavian countries, meaning there is a
great deal of room for improvement. But it is also necessary to
promote any educational initiatives that will help the economy
reach the Western European level.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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