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How Banks' Tasks Regarding Their Financed Carbon Footprint Is Misunderstood by EU Regulation

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  • Gabor Szigel

    (OTP Bank Nyrt.)

Abstract

Regulation in the EU makes banks responsible for the greenhouse gas (GHG) emissions of their borrowers and thus tries to use them as leverage to nudge polluting industries into the carbon-free transition. For lack of better alternatives, this occurs based on metrics that are neither reliable nor robust. While welcomed by the industry, the European Commission's recent omnibus packages aimed at simplifying sustainability legislation will also probably not change that situation materially. Although it is perhaps well-intended, this approach assigns banks a task which they are not qualified for. It is unsurprising that the entire initiative has resulted in bureaucratic formalities in banks' reports rather than substantive progress. It is not the best way to get credit institutions engaged in the green transition. Instead, banks should focus on what they are best at: lending, and more specifically, on lending for projects that advance the carbon-neutral transformation of the economy.

Suggested Citation

  • Gabor Szigel, 2026. "How Banks' Tasks Regarding Their Financed Carbon Footprint Is Misunderstood by EU Regulation," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 25(1), pages 151-163.
    • Handle: RePEc:mnb:finrev:v:25:y:2026:i:1:p:151-163
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    File URL: https://hitelintezetiszemle.mnb.hu/sw/static/file/fer-25-1-e3-szigel.pdf
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    References listed on IDEAS

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    1. Boglarka Kiss & Daniel Homolya & Gyorgy Walter, 2025. "The Relationship between ESG Factors and Corporate Credit Risk: Research Trends from a Bibliometric Perspective," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 24(4), pages 96-117.
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      Keywords

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      JEL classification:

      • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
      • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
      • P18 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Energy; Environment
      • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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