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According to the decision of the Hungarian Association of Investment Fund Managers (BAMOSZ), national funds can now also display the ESG rating in addition to the above rating categories (stocks, bonds, absolute returns, etc.). ESG stands for responsible investment in the environmental, social and governance capital markets. The news can be read here:
One of the strategic objectives of Magyar Nemzeti Bank (MNB) is to support the environmental sustainability of the national financial intermediation system significantly stronger than at present through its financial products and services. To achieve this goal, the central bank announced its Green Program in February 2019, and since then it has been continuously monitoring and supporting the green initiatives of supervised institutions and professional organizations.
The MNB welcomes BAMOSZ’s decision as there is a great need to develop an ESG conscious investment culture in Hungary. By rating the ESG of the funds, investors can receive information on the extent to which the given fund takes into account aspects related to environmental and social sustainability and responsible corporate governance in relation to their investments.
In June 2020, assets managed by Hungarian fund managers in ESG-themed funds barely exceeded 0.5 percent. Additionally, domestic funds primarily buy foreign ESG-rated securities for the time being.
At the same time, it is important to see that the ESG rating of the funds does not mean that the given fund would choose only green and sustainable investments, and only a part of the ESG funds have the explicit objective of achieving and maximizing the positive impact on sustainability. Therefore, it is especially important that investors are informed about the detailed content of the category system developed by BAMOSZ before making their investment decisions.
Important regulatory developments are also expected with respect to the “green” and sustainability benefits of investments. The EU regulation on sustainability disclosures in the financial services sector enters into force on March 10, 2021, which will focus on measuring the contribution to climate change mitigation and other sustainability goals. The EU regulation provides for both pre-contractual disclosure with clients and the publication of information in subsequent reports and on websites in general. In this sense, in addition to the ESG rating, investors will receive even more information about the environmental impact and possible benefits of investments.
Detailed rules for mutual fund managers will be developed by the European Securities and Markets Authority (ESMA) and will be published later in the form of a regulatory technical standard.
Cover image: Getty Images
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