Huge sums of money are looking for their owner – There are plenty of resources for greening, innovation and investment

ESG compliance for funding

Gergő Wiederthe director of KPMG reported in his presentation that with the entry into force of the CSRD (Corporate Sustainability Reporting Directive) this year, sustainability reporting has risen to a new level: the number of companies obliged to report non-financially has tripled, so the amount of available data will also increase.

More than 75% of the sales revenue of EU companies will be covered by the new regulation, so the period of volunteering will end and reports will be prepared according to uniform standards.

– he highlighted Gergő Wieder, then he added that the ESG law in Hungary helps preserve the competitiveness of the Hungarian economy. The Hungarian legislator defined a set of conditions even more detailed than the CSDDD (Corporate Sustainability Due Diligence Directive), within which companies must also publish an ESG report, which is somewhat different from the sustainability report required by the CSRD. Some parts of the ESG Act ensure that the reports are prepared according to a higher quality, which is good news for financial institutions, for example, because they are currently struggling a lot with the quality of the data.

What do we know about the possibilities of Hungarian companies?

Based on KPMG’s research, 62% of companies that published a sustainability report identified environmental risk, 54% social risk, and 39% corporate governance risk. It is important to see that sustainability not only creates risks, but also opportunities. “Many products are available on the market that help finance various net zero goals – however, this requires high-quality data,” the expert emphasized.

It was also mentioned in the presentation that green bonds and green loans are also widespread in Hungary and enable project-based financing. It should be emphasized that a large positive effect can be achieved if we start greening activities that are not currently green. There are products – for example Sustainability-linked bond (SLB) – that provide more favorable financing for companies by undertaking a specific goal. THE sustainable bond trends regarding Gergő Wieder told me that A big increase between 2020 and 2021 could be experienced, then when the size of the entire lending and bond market declined, sustainable financial products also decreased in nominal terms, but their proportion increased compared to other traditional products,

that is, investors were looking for this even in difficult times.

THE one of the advantages of sustainable financial financing is that it can reach a much wider investor base.

Development of green technologies, green investments – Funds must be obtained!

At the conference Gábor Gyura, (fsustainable financial advisor, UN Environment Program) asked the participants of the round table discussion about the world of private capital, the process of bringing in EU funds, lending and project financing options, the ESG rating system, and corporate perspectives.

In terms of private equity Hey Robert, (Investment Partner, OXO Holdings) said that they are involved as investors in three areas. On the one hand, it is during incubation processes – that is, for a good idea or business plan – they provide support and some resources in order to be able to enter the market during the next round of capital raising. The second area is that they are looking for technology investments in the form of a public limited company, and finance companies with green or renewable technology. The third area a 100 million euro green technology fund, where each of their investments cannot be less than 2-3 million euros. The Green Tech fund has two main focuses: supporting ideas and companies related to climate change, energy transition, and decarbonization that can operate on a market basis. Another focus is agritech, that is, the support of agricultural technologies.

We believe that innovative ideas can be embraced in the field of agriculture, which can achieve outstanding activity not only in Hungary, but also in the region.

he said Hey Robert, then he added: “When we receive a new idea, we always examine its innovative nature, as well as the legitimacy of its market. It is important that it is scalable, in order to increase sales and market share. Our process ends with sales, they are usually bought by an industry or technology player, but there are also examples of going public.”

He reported on the possibilities of obtaining direct EU funds Judit Zsamba, (project manager, Hungarian Development Promotion Office, MFOI) who said that the MFOI had given up on bringing the system of direct EU funds closer to Hungarian actors. The green transition is also a priority at the EU level, direct resources in the current budget cycle – which we are halfway through – create opportunities of 370 billion euros. In addition, it is definitely worth mentioning the Connecting Europe Facility (CEF) support, which embraces energy, transport and international network developments, as well as Horizon Europe, which is the largest direct EU fund with a budget of 95.5 billion euros. The Innovation Fund should also be highlighted, the most important task of which is to market technologies that serve net zero goals. It is a success story that the first Hungarian winning project was born in this fund – this is linked to the name of the Terran roof tile: solar cells integrated into the roof tile will be further developed.

We are currently not doing well in terms of successful tenders, the Hungarian actors are mostly used to cohesion resources. A Horizon Europe database reveals that the 20 most developed EU regions receive half of the subsidies out of 250 European regions, meaning that the remaining 230 regions receive the other 50%.

– the project manager pointed out the disproportionalities. In Hungary, the Central Hungarian region is also only in 69th place, ahead of us are Slovenia, Cyprus, Warsaw, Prague and the Bucharest region.

There is no specific recipe, but we try to help Hungarian companies by presenting good practices and even training, so that they can have more successful tenders.

he added Judit Zsamba.

About the development of lending Péter Kerskenyi, (director – Project, real estate and syndicated financing, Raiffeisen Bank), said that the share of green loans was dominated by renewable energy, that their share could grow the most in this area, which was supported by the solar panel boom, but it is not at all certain that this will continue to be the case in the future. As renewable energy projects will have to be financed on a market basis – not with subsidies – this dominance may change. “We also see a lot of loan applications from the field of energy storage, green transport is what can still bring business to the table. Bringing battery factories to Hungary is a priority for the government, and this also provided an opportunity for banks, also from the point of view of real estate financing.” said the expert.

“We provide large investors with tools to support investment decisions – ESG-related metrics, indices, reporting tools,” he said. Rozália Miklós, (Managing Director, Head of the Budapest Office, MSCI), then explained: Based on our 2022 publication, we see that only 40% of the 9,000 companies we examined reported Scope 1 and 2 emissions, and 25% reported Scope 3 emissions. At the same time, these data are becoming more and more important for financiers, so there is a trickle-down process, which is why we expect these percentages to become larger and larger.

Currently, our goal is for ESG ratings to be automatically generated.

Now this is a partly manual process, it still works for 10,000 companies, but it can no longer be done for 1 million companies, data will play a big role in this. For large companies, we will prepare the rating in the usual manual process, but for small companies, where there is not so much data, we would use estimates in the future. So we want to achieve that in a gradual solution, at different levels of reliability, we can give an ESG rating for all of them – he explained the plans Rozália Miklós.

Attila Soltész, (executive director, 4S-2000 Kft., president, Informatics for Society Association) he said that the entrepreneurs complain about the non-refundable subsidies, for example, the solar panel development carried out by them paid off in 2 and a half years due to the non-refundable subsidy form. He also reported that ESG aspects are already appearing in the expectations of customers. Another problematic area, he mentioned, is that some competitors do not comply with the strictness of carbon dioxide emissions, so European competitiveness is a point of concern. It must also be seen that companies often experience the expectations as a tax, paying official and consulting fees, which can be an additional burden in terms of cost and capacity.

Further reports from the conference:

Cover image source: Portfolio/Ákos Stiller