BC4LS Sustainability Interviews, Budapest Stock Exchange

How does the BSE address the issue of sustainability?

The Budapest Stock Exchange, as a central player in the Hungarian capital market, pays particular attention to the issue of sustainability. We try to raise companies' awareness of the complex expectations that the environmental, social and governance standards, or ESG for short, represent. We also organise trainings on sustainability, in various forms. In addition, it is a priority for the BSE that the stock exchange, as a company, incorporates sustainability/ESG principles into its operation, thus setting an example for listed companies and the Hungarian SME sector. A step in this direction is, for example, the publication of the BSE's own sustainability report and ESG strategy:
https://www.bet.hu/Rolunk/Sajtoszoba/Sajtokozlemenyek/bemutatta-elso-fenntarthatosagi-jelenteset-a-budapesti-ertektozsde

The climate change has brought along the need for a fundamental transformation of economies. How does this affect capital markets? Can we see any sustainability trends yet?

There is a growing awareness of this in general corporate approach and among listed issuers – more and more companies are placing emphasis on reporting on sustainability activities, whether it is preparing a sustainability report or obtaining ESG ratings. This positive trend is also reinforced by the growing interest of investors in investment products that are compliant with ESG.
On the BSE, we can see the spreading of sustainability not only in terms of reporting practices and ESG compliance, but also in terms of the activities of companies: there are a number of listed companies who are engaged particularly in green energy. Suffice it to mention ALTEO, PannErgy or, in the SME market, NAP Nyrt., EU-Solar or ASTRASUN on the BSE Xtend.
In this way, in more and more cases, the purpose of raising capital, whether through issue of bonds or capital increases, is to achieve the sustainability ambitions of the issuer, such as improving energy efficiency.

It's all about ESG these days. Is it really gaining ground?

It is clear that the ESG approach is more and more widespread, which is facilitated by the fact that ESG is no longer just a set of criteria, but also an issue of corporate competitiveness that is playing an increasingly important role in economic decision-making. If a company is able to integrate the ESG criteria effectively and appropriately into its operation, it can lead to more efficient business management, faster response times, more satisfied and committed employees, increased ability to raise capital, better valuation, stronger brand value and long-term resilience, so it is definitely worth considering it seriously.

ESG is therefore offers an opportunity for positive discrimination, but consequently, if it becomes a fundamental expectation, those who do not start it early enough may be completely left out of the investors’ list, which could also decrease valuation.

Issuers may face many regulations and requirements in this area. How difficult does it make the situation of issuers?

ESG compliance has now become a whole new dimension for the issuers. This is one of the reasons why the BSE ESG Guide was created in 2021. It helps issuers to achieve their sustainability objectives, with an overview of the criteria and specific proposals to meet them.

How does the BSE support listed companies in the area of sustainability?

The BSE's activities in this area include encouraging ESG reporting practices of issuers as well as the integration of sustainability criteria into corporate operations, supporting Hungarian SMEs in getting greener, developing and introducing green products and thus indirectly promoting the improvement of sustainable finance.

The ESG Guide, that we have just mentioned, published in 2021 is a very important element of this effort. Although the green financing advice and ESG training provided by the Mentor Programme do not primarily aim at listed companies, they are also very important pillars of the BSE's ESG education activities. During these programmes, the BSE accredited consultants provide companies with more detailed information. The BSE's ESG advisory pilot programme has been launched recently, with the participation of 27 medium-sized companies, and it is based on an evaluation methodology developed jointly by the BSE and EY.

It is important that the BSE aligns these programmes and initiatives with international efforts and global goals, such as the Sustainable Development Goals (SDGs), the framework of objectives issued by the United Nations in 2015.

What do you think are the biggest challenges in relation to achieving sustainability?

The biggest challenge, in my view, is that we have to comply with a totally new strategic approach. Moreover, compliance is a complex task which, in addition to often requiring fine-tuning or even restructuring of the company's operation, involves the regular and continuous provision of large amount of data, and it also entails costs, the return on which can only be measured in the long term.

Do you have any advice in relation to sustainability that you would like to pass on to others?

Sustainability is the future! Compliance will be inevitable for companies to maintain and strengthen their position, so getting information on ESG is key.
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