In what ways can banks play a role in advancing the green transformation of the economy?

Gergely Pókos: Regulators clearly expect banks to be the engines of sustainability transition. Both following our own convictions and in accordance with the regulator's intention, OTP Bank’s sustainability strategy has a strong focus on building its green lending book, financing our clients’ investments in transitioning to a low emission economy in all industries and segments.

ESG/sustainability is still in its early stages in the Central and Southern European region.  However, its importance and relevance are growing both because of the increased legal harmonisation with the EU as well as the growing investor awareness and requirements.

Legal compliance is not only relevant for countries within the EU but also for those that trade with the EU. Some of the major trading partners of the countries in the region have already incorporated ESG standards into their procurement and other processes, so it is inevitable for the Balkans to catch up to ensure global competitiveness for their products and services. 

Similarly, investor expectations do not stop at national borders. ESG-conscious investors are raising sustainability expectations for Central European countries, regardless of the local context. They do not expect immediate and uncompromising compliance, but they do want to see countries and their economic entities moving towards sustainability. They also expect a high degree of transparency on the issue.

In addition, sustainability also has business relevance. Many of the sustainability issues are complex, but there are clear themes and actions to be taken, and we see that the region is making significant progress in these areas, such as renewable energy production, electrification of transport and energy efficiency in the real estate sector. OTP is present in 12 countries in total and in 4 countries in the Balkan region. We can see that in each country, there is a clear trend towards sustainability in these industries, and we are there to promote the green transition of the economies.

How does OTP Group`s Green Loan Framework contribute to financing green projects and fostering sustainability within the economies it operates in?

Gergely Pókos: The Framework forms the basis of OTP Group’s definition of green loans; this way it supports OTP’s efforts in transparency around green lending and preventing greenwashing.

The Green Loan Framework has been approved by the Central Bank of Hungary as first of its kind in Hungary, and it is the first milestone tool which enables OTP Group to fulfil its role of financing the green transition. In 2023, the Green Loan Framework expanded to include new economic activities related to climate change mitigation and adaptation, taking into account the composition of the OTP portfolio and business opportunities, and now covering 51 economic activities in 6 macro sectors. The geographic scope of the framework has also been extended, which was successfully rolled out at OTP Group, at its subsidiary banks (excluding Russia, Moldova, Ukraine, Uzbekistan).  

What are the plans of OTP Group for the coming years in the sustainability realm and green finance area?

Gergely Pókos: OTP is aiming to be a regional leader in financing a just and gradual transition to a lower carbon economy. To that effect, we will broaden and deepen our green financing activities. Besides continuing to build the green book funding activities we are already engaged in, we have been closely following market trends and client needs and are ready to adapt our financing frameworks and processes to new demands, e.g. financing new types of green activities, such as circular economy or green manufacturing techniques. 

Further building the green loan portfolio is an important element in the gradual decarbonisation of the financed portfolio, which financial institutions across the world need to accomplish. OTP Group also embarked on the decarbonisation journey and will disclose its plan for decarbonising its portfolio in 2025. What is important to highlight is that OTP’s approach is not restrictive and prohibitive, focusing not on what not to do in an unsustainable world but on what needs to be done to build a more sustainable one. In practice, this means that we do not intend to leave customers in “brown” or polluting industries behind, but want to support them to make the transition.