The Hong Kong Monetary Authority (HKMA), the central banking institution of Hong Kong, has announced a draft update to the Hong Kong Taxonomy for Sustainable Finance. This classification system aims to define and categorise environmentally sustainable economic activities to direct capital towards these areas. The proposed update seeks to expand the Taxonomy to include transition activities, along with new sectors and activities.
The new proposals follow the publication of the initial Taxonomy by the HKMA in May 2024. This framework was designed to help investors identify and support activities that positively impact the environment, avoid those with negative impacts, align investments with climate goals, and reduce the risk associated with assets not aligned with a low-carbon future.
Initially, the HKMA adopted a phased approach to establishing the Taxonomy, intending to add more sectors and categories over time. This included plans to introduce transition categories. The expansion from solely green categories to include transition elements is deemed essential for promoting the decarbonisation of the real economy. It aims to mobilise transition finance for high-emitting sectors such as energy and manufacturing, facilitating their shift towards more sustainable practices while balancing environmental imperatives with economic growth.
The proposed transition category targets carbon-intensive activities on a “time-bound decarbonisation journey” to align operations with a 1.5°C trajectory, ultimately achieving net zero by 2050. It also includes activities not fully aligning with green criteria but capable of substantial near-term greenhouse gas reductions. The “time-bound” requirement prescribes sunset dates for activities and measures, varying by sector and activity, considering factors like technological readiness, environmental impact, and regulatory policies. For instance, the draft specifies a sunset date of 2030 for the Maritime sector’s transition activities, aligning with international shipping standards, while the Energy sector’s sunset date is 2035 to accommodate the development of emissions-reducing technologies.
The initial Hong Kong Taxonomy covered 12 economic activities across four sectors: power generation, transportation, construction, and water and waste management. The proposed “Phase 2A” aims to extend the Taxonomy’s scope to the manufacturing and information and communications technology sectors, adding 13 new categories, including electricity transmission and distribution, district heating and cooling, and low-carbon transport infrastructure.
Additionally, the draft proposes expanding the Taxonomy’s focus from climate change mitigation to include climate change adaptation as a new environmental objective, highlighting the need for funding to manage physical risks and respond to the increasing frequency of extreme weather events.
Looking ahead, the HKMA plans to further expand the Taxonomy in future phases, which may include adding activities in existing sectors, potentially extending coverage to areas such as Carbon Capture, Utilisation and Storage, further developing the climate change adaptation objective, and exploring the “Do No Significant Harm” principle.
The HKMA has opened a consultation on the proposed Phase 2A, available until 8 October 2025. Interested parties can access the draft and consultation details [here](https://brdr.hkma.gov.hk/eng/doc-ldg/docId/20250903-11-EN).
