Sustainability efforts have been in place in OTP Group for almost 15 years; these efforts multiplied in the past years. Our mission in the ESG space has been formulated: OTP Group is aiming to be the regional leader in financing a fair and gradual transition to a low-carbon economy. OTP Group is continuously broadening its ESG activities despite of facing several challenges: managing the varying maturity of local markets, raising the relatively low ESG awareness of our customers, responding to rapidly changing regulatory changes that are not necessarily harmonized across the Group's countries, and managing the different expectations of our investors.
The primary goal of OTP Group is to become the most prepared Central and Eastern European bank in the field of green financing and sustainability. After having set up the foundations (proper organizational framework, governance mechanisms, ESG strategy) in 2021, 2022 was about implementation: OTP Group broadened and deepened ESG activities in both business development and risk management, at its headquarter as well as in subsidiary banks.
Last year’s first major milestone in business development was the preparation, adoption, and implementation of the Green Loan Framework (GLF), which supports the OTP’s strategic direction to be a regional leader in financing a just and gradual transition to a low-carbon economy and to build a sustainable future by offering balanced financing solutions.
“As a financier, a bank has many tools to contribute to the green transition of the economy. One of these is the financing of green investments and lending to sustainably operating businesses. Our Green Loan Framework, based on international requirements serves exactly this purpose” - said Gergely Pókos, Executive Director of OTP Bank Plc.'s Green Program Directorate.
OTP’s green loan portfolio has been steadily growing: the on–balance sheet green exposure at OTP Group level was more than HUF 260 billion by the end of 4Q 2022, thus we have been on track to successfully achieve our 2022 goal and to reach our HUF 1,500 billion target for 2025.
Another milestone was the establishment of OTP Group’s Sustainable Financing Framework (SFF) and its introduction to the market in the second quarter of 2022. The Framework was set up on the basis of EUR 4.6 billion Social eligible assets, and EUR 949 million Green eligible assets in OTP Group level banking portfolios. In both asset categories the portfolio creation is continuous due to Group wide banking operations. On 5 July OTP Bank issued its first EUR-denominated MREL eligible green bonds, with an order book well above EUR 400 million. The successful issuance of the 3-year bond callable after two years clearly demonstrated that the international market supports OTP Group's ESG efforts and is confident in the continued business strategy of the region's leading banking group.
As a prudent bank, we also address the risk side of ESG in depth. The growing importance of ESG within risk management is illustrated by the fact that a dedicated ESG Risk Program has been defined as one of the focus areas of the OTP Group Risk Strategy for 2023-25.
Besides the business and risk aspects, we have paid particular attention to transparency: OTP Group website was launched, with a sub-page dedicated to sustainability, listing all our ESG related public policies and disclosures.
The extension of the ESG program to the subsidiary banks is progressing as planned. In 2022, as part of the annual update of the ESG strategy, the subsidiary banks prepared their local strategies, set green loan targets, and identified the necessary organizational changes in order to reach the targets.
