ESG is here to stay - changing regulation in Hungary

The guest speaker at this year's first meeting of the AmCham Workspace and Facilities Management (WFM) Committee was Joël Scherrenberg MRICS, Chair of RICS in Benelux and member of the RICS Europe World Regional Board, who provided useful insight into the world of ESG. Dr András Balásfalvi-Kiss, Head of Kingfisher and ESG and Sustainability Director at Grant Thornton, spoke in detail about the ESG obligations of domestic companies under Act CVIII of 2023 and the detailed rules published in December, with a focus on the real estate market.

Zsolt Kákosy MBA MRICS, Chairman of the Workplace and FM Committee of the American Chamber of Commerce in Hungary and Senior Director of Property Management at ICON Real Estate Management, stated in his introduction that it is a very topical issue where Hungary is at the forefront of regulation and given that it will significantly affect companies through the credit and capital markets, it is a critical issue. He praised the collaboration between RICS and the Workspace and Facility Management Committee of AmCham Hungary, which will allow members to gain further access to the highest level of expertise through dialogue between the two organisations' highly qualified experts.

In his presentation, Joël Scherrenberg MRICS addressed the issues of climate change and high carbon emissions, as well as the balance between office and home working. He also talked about how to interpret the real estate aspects of the ESG directives. He also highlighted the overall importance of the CSRD (Corporate Sustainability Reporting Directive), which will directly or indirectly affect all companies in two to three years. One of the main reasons for his presentation was the recent RICS publication "ESG in Valuation", the result of an industry-wide initiative to ensure that valuers, investors, banks and other market participants act consistently when considering ESG data in the valuation process.

The CSRD and the CSDDD (Corporate Sustainability Due Diligence Directive) require companies to prepare and publish sustainability reports. The WFM Committee meeting was also quick to respond to the requirements of Act CVIII of 2023 regulating this area, with a presentation by Dr. András Balásfalvi-Kiss, which will allow domestic companies to prepare for the regulatory and reporting obligations across the European Union and the CSRD-related due diligence of their entire supply and value chain.

A new element in the regulation is that banks are required to screen their clients from an ESG perspective for loans above HUF 50 million, so it is important that clients meet the criteria. With the draft unified minimum questionnaire being prepared by the Magyar Nemzeti Bank (MNB), domestic companies will have a complex task, as they will have to answer a number of questions not only about the operation of their own organisation, but also about their entire supply chain, so ESG assessment will be a key issue in the credit market in the coming years.

Report from Zsolt Kákosy MRICS

Contributor: Anna Orcsik, RICS