Highlights

• Phase 2A expands Hong Kong’s Taxonomy to six sectors and 25 economic activities.
• Transition Activities and Measures introduced to address market demand for low-carbon pathways.
• Climate Change Adaptation category launched to fund resilience projects against extreme weather.

Over a year ago, the Hong Kong Monetary Authority (HKMA) launched Phase 1 of the Hong Kong Taxonomy for Sustainable Finance.

This framework was designed to give investors and companies a clearer picture of what counts as green or sustainable, helping prevent greenwashing and channelling funds into credible projects.

The first version defined 12 activities in four sectors — power generation, transportation, construction, and waste management — and some banks and corporates have already applied it in their operations.

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Now, Phase 2A has been released for public consultation.

The HKMA describes this as part of a step-by-step process, with the Taxonomy being a living document that will continue to expand. The new phase broadens the scope by adding two new sectors — manufacturing and information and communications technology — raising the total to six sectors and 25 economic activities.

Another major update is the introduction of Transition Activities. These cover projects that may not fully meet green standards yet but can reduce carbon emissions in the near term or have a structured roadmap to becoming greener.

For example, hydrogen production using fossil fuels could be classed as a transition activity if it shifts towards cleaner energy or introduces carbon capture. Alongside this, Transition Measures focus on specific technologies and upgrades, such as switching to low-emission equipment in factories.

By including these categories, the Taxonomy addresses the demand for financing that supports gradual but meaningful decarbonisation.

Phase 2A also adds a Climate Change Adaptation category, which indicates the urgent need to prepare for rising physical risks from climate change.

Unlike mitigation, which is about cutting emissions, adaptation means taking steps to reduce the impact of extreme weather and climate threats. In Hong Kong, heavier rainfall and flooding highlight this urgency.

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The new category directs capital towards projects like flood prevention systems and water resource monitoring, helping build resilience. Looking forward, the scope may widen to other climate risks depending on local experience and market needs.

The HKMA stresses that the Taxonomy remains voluntary for now. However, it aims to make the tool widely usable and based on science, so that it can become a reference point for both local and global investors.

Authorities will monitor how it is applied and may, in time, explore ways of integrating it into banking supervision. Public feedback on the Phase 2A prototype is now invited, which will shape future phases, including 2B.

Ends/

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Source: HKMA