Summary of the HKMA Consultation Report: Prototype of Hong Kong Taxonomy for Sustainable Finance (Phase 2A)
This document is a consultation report published by the Hong Kong Monetary Authority (HKMA) in January 2026, detailing the outcomes of a public consultation on the prototype of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). The primary purpose of this report is to summarise the feedback received from various stakeholders, outline the HKMA's responses, and detail the adjustments made to the Phase 2A prototype based on this input. The Taxonomy serves as an enabling tool to guide market participants in making informed decisions about green and sustainable finance, with the ultimate goal of scaling up relevant capital flows in Hong Kong.
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Document Overview
The report marks the culmination of a public consultation period following the HKMA's publication of the Phase 2A prototype of the Hong Kong Taxonomy for Sustainable Finance on September 8, 2025. This phase builds upon the foundational Phase 1 Taxonomy, released in May 2024, by introducing new green activities, crucial transition elements, and a new environmental objective focused on climate change adaptation. The consultation process aimed to gather diverse perspectives from financial institutions, corporations, industry bodies, NGOs, and other stakeholders. The report, developed in collaboration with the Climate Bonds Initiative, presents a comprehensive analysis of the feedback received, including areas of broad support, specific concerns, and suggestions for improvement, alongside the HKMA's strategic responses and resulting modifications to the Phase 2A Taxonomy.
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Main Content
The core of the report revolves around the feedback received for the Phase 2A prototype and the HKMA's deliberations and decisions. Key aspects covered include:
- Taxonomy Design and Structure: Respondents generally commended the design, structure, and hierarchical organisation of the Taxonomy, finding it logical, credible, and user-friendly. The "traffic-light" approach, classifying activities into Green, Transition, and Exclusion categories, was seen as a practical guide.
- Taxonomy Methodology: The report details feedback on the methodology for both climate change mitigation and adaptation.
- Mitigation: The inclusion of transition elements (Transition Activities and Transition Measures) was strongly supported, recognising their importance in facilitating financing for activities not yet fully aligned with 1.5°C pathways but demonstrating significant progress. The use of science-based methodologies, time-bound criteria, and explicit sunset dates for transition activities was also lauded for ensuring rigor and credibility.
- Adaptation: The introduction of climate change adaptation as a new environmental objective, with an initial focus on water-related measures, was well-received. The whitelist approach for adaptation measures was considered pragmatic, though suggestions were made for expanding the whitelist and incorporating more technical criteria and maladaptation checks.
- Sector Chapters: The report provides detailed feedback and HKMA responses for specific sectors and economic activities included in Phase 2A. This includes:
- Energy Sector: Discussions around transmission and distribution of electricity, including emissions thresholds for connected generation capacity and grid emissions factors. The inclusion of renewable and low-carbon gases and electricity storage was also addressed.
- Transportation Sector: Clarifications on the scope of personal mobility devices, cycle logistics, and vehicles.
- Buildings Sector: Feedback on construction of new buildings and installation/maintenance of building equipment, with discussions on alignment with local and international standards like BEAM Plus and the consideration of embodied carbon.
- Waste Sector: Requests for quantitative definitions related to biogas utilisation and bio-waste thresholds.
- Manufacturing Sector: Detailed discussions on the manufacture of hydrogen, including scope, lifecycle emissions, and the use of renewable electricity. The manufacture of aluminium and related emissions thresholds were also a focus.
- Information and Communications Technology (ICT) Sector: Feedback on data processing, hosting, and related activities, including water usage, refrigerant GWP, and construction criteria. The report also covers data-driven solutions for GHG emissions reductions.
- Further Development and Implementation: The report outlines suggestions for the future expansion of the Taxonomy to include other environmental objectives (e.g., pollution prevention, biodiversity, circular economy) and new sectors (e.g., waste-to-energy, agriculture, food and beverage). It also discusses priority use cases for the Taxonomy, such as sovereign issuances, sustainable debt, ESG fund labelling, and innovative financing products, as well as its role in policy and corporate strategy.
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Key Changes
This section details the significant policy shifts, updates, and new requirements resulting from the consultation:
- Superseding Phase 1: Phase 2A Taxonomy now supersedes Phase 1. All future references to activities and measures should align with the latest technical criteria established under Phase 2A.
- Interoperability Enhancements: To improve interoperability with global standards, International Standard Industrial Classification of All Economic Activities (ISIC) codes have been added to each activity. The HKMA will continue to participate in relevant international interoperability initiatives.
- Clarification on Transition Plans:
- Activity-level transition plans: Required for specific Transition Activities (e.g., maritime vessels, data centres) to demonstrate a credible transition trajectory towards Green Activity criteria.
- Entity-level transition plans: Required for certain Transition Measures involving forward-looking decarbonisation technologies with capacity-based requirements (e.g., maritime vessel engines designed for renewable energy adaptation).
- New Environmental Objective: Climate Change Adaptation: Phase 2A introduces climate change adaptation as a new environmental objective, initially focusing on water-related measures. A whitelist approach has been adopted for adaptation measures, with plans to explore more sophisticated assessment methods in future phases.
- Expanded Sector Coverage: The Taxonomy's scope has been broadened to include new sectors:
- Manufacturing: Activities such as the manufacture of aluminium and hydrogen.
- Information and Communications Technology (ICT): Data processing, hosting, and related activities, and data-driven solutions for GHG emissions reductions.
- Refined Mitigation Framework:
- Transition Activities: Defined as economic activities not yet aligned with a 1.5°C pathway but progressing towards it or enabling significant short-term emissions reductions by the designated sunset date. The entire activity can access sustainable financing.
- Transition Measures: Defined as specific components and interventions within an activity that can partially improve emission performance, facilitating financing for granular processes and technologies. These are eligible only for transition CapEx and OpEx financing and cannot claim revenue alignment with the Taxonomy.
- Sunset Dates: Sunset dates have been calibrated based on factors like technology maturity, sectoral emissions, market readiness, Hong Kong's climate commitments, and international alignment. For example, a 2040 sunset date is set for aluminium manufacture.
- Clarification on Taxonomny Alignment Metrics: Detailed definitions and implications for Capital Expenditure (CapEx), Operational Expenditure (OpEx), and Revenue in claiming Taxonomy alignment have been provided.
- Sector-Specific Updates:
- Energy: Emissions thresholds for transmission and distribution networks refined. "Renewable and low-carbon gas" is defined, and thresholds are based on actual throughput. All battery types are eligible for electricity storage. Waste heat/cogeneration from fossil fuels excluded from district heating/cooling criteria. Fossil gas power generation is under consideration for future phases, with alignment to IEA Net Zero by 2050 Roadmap and EU Taxonomy being assessed.
- Transportation: Scope of light commercial vehicles clarified (max 5.5 tonnes). Motorbikes are explicitly under B-003.
- Buildings: Alignment with the latest BEAM Plus and Building Environmental Performance (BEC) standards is being reviewed for future inclusion. Reference to 25% reduction for Zero-Carbon-Ready Building Certification removed. NABERS scheme alignment with Australian Government policy not to allow GreenPower as a substitute for intrinsic efficiency. Lifecycle approach, including embodied carbon, is being considered for future phases, with the Manufacturing sector expansion targeting upstream emissions.
- Waste: Quantitative definitions for "majority of the produced biogas" and thresholds for bio-waste are clarified.
- Manufacturing: Geological hydrogen and hydrogen derivatives are not included in E-001 at this stage. A "cradle-to-site" methodology is applied for hydrogen manufacture lifecycle emissions. Additional renewable electricity usage requires temporal and geographical correlation, with monthly as minimum and hourly as best practice. Aluminium refining thresholds are based on IAI's 1.5°C scenario. Secondary aluminium production from scrap is considered automatically eligible under Green Activity.
- ICT: BEAM Plus standards are explicitly incorporated. Alternative options for water usage (recycled water, air cooling) are provided. GWP threshold for refrigerants (675) aligns with global taxonomies. Multi-functional data centres are assessed under both C-002 (construction) and F-001 (operations). For data-driven solutions, demonstration of GHG emissions reductions compared to best performers is required.
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Important Dates
- May 2024: Publication of Phase 1 of the Hong Kong Taxonomy for Sustainable Finance.
- September 8, 2025: Publication of the prototype of Phase 2A Taxonomy for public consultation.
- January 2026: Publication of this Consultation Report.
- Effective Dates for Phase 2A Taxonomy: While not explicitly stated as a single "effective date" in this report, the consultation report's publication in January 2026 signifies the finalised Phase 2A Taxonomy will likely be implemented or become a reference point shortly thereafter, informing future sustainable finance activities.
- Future Phases: The report discusses ongoing and future development, indicating a continuous process of enhancement and expansion of the Taxonomy beyond Phase 2A. Specific timelines for future phases are not provided but will be subject to project priorities, institutional capacity, and cost-benefit analysis.
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Impact Scope
The Hong Kong Taxonomy for Sustainable Finance, including Phase 2A, is designed to impact a broad range of market participants and institutions within Hong Kong and those engaging with Hong Kong's financial markets.
- Applicable Parties:
- Financial Institutions: Banks, asset managers, insurance companies, and other lending and investment entities.
- Corporates: Companies of all sizes, including SMEs, seeking to finance sustainable projects or transition their operations.
- Issuers: Entities issuing green bonds, sustainability-linked bonds, and other sustainable debt instruments.
- Investors: Both institutional and retail investors looking to allocate capital to sustainable investments.
- Regulators and Policymakers: The Taxonomy serves as a foundational tool for policy development and regulatory guidance in sustainable finance.
- Industry Bodies and NGOs: These stakeholders are instrumental in providing feedback and supporting Taxonomy adoption.
- Affected Institutions: All entities involved in the issuance, financing, or investment of sustainable finance products and activities within Hong Kong.
- Degree of Impact:
- High Impact: For institutions actively involved in green and sustainable finance, the Taxonomy will directly inform their product development, risk assessment, due diligence processes, and reporting. It will standardize definitions and criteria, reducing ambiguity and facilitating cross-border comparisons.
- Moderate Impact: For corporations not yet deeply engaged in sustainable finance, the Taxonomy provides a clear roadmap and incentives for adopting more sustainable practices and accessing green capital. It can influence strategic planning and operational changes.
- Indirect Impact: The Taxonomy's influence will extend to the broader financial ecosystem by fostering a more transparent and credible sustainable finance market, potentially influencing investor confidence and capital allocation trends.
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Compliance Requirements
The Hong Kong Taxonomy is presented as a voluntary tool at this stage. However, its adoption implies a commitment to adhering to its defined criteria and principles.
- Specific Compliance Steps:
- Activity Assessment: Undertake a thorough assessment of specific economic activities and projects against the defined Green Activity, Transition Activity, and Transition Measure criteria outlined in the Taxonomy.
- Criterion Adherence: Ensure that projects and activities meet the quantitative and qualitative technical screening criteria, including emissions thresholds, resource efficiency standards, and other performance indicators specified for each sector.
- Documentation and Reporting: Maintain comprehensive documentation to support claims of Taxonomy alignment. This includes data, methodologies, and any necessary certifications or attestations. For Transition Activities and Measures, detailed transition plans (activity-level or entity-level) must be developed and maintained.
- Due Diligence: Financial institutions are expected to conduct due diligence to verify the Taxonomy alignment claims of the projects and activities they finance or invest in.
- Reporting Requirements:
- Use-of-Proceeds Reporting: For sustainable debt instruments, issuers will be expected to report on how the proceeds are allocated to Taxonomy-aligned activities.
- Alignment Reporting: Companies may report on the proportion of their CapEx, OpEx, or revenue that aligns with the Taxonomy.
- Transition Plan Disclosure: Entities utilizing Transition Activities or Measures are required to provide credible transition plans as part of their disclosure.
- Implementation Guidance:
- Voluntary Tool Status: The HKMA acknowledges the Taxonomy is voluntary, but encourages its uptake.
- Regulatory Support: The HKMA suggests that regulatory agencies can provide support to increase adoption through various means, which will be elaborated on in future guidance.
- Use Cases: The Taxonomy is intended to support various use cases, including:
- Guiding government and Exchange Fund activities.
- Underpinning sustainable debt and loan markets.
- Benchmarking for ESG fund product construction, labelling, and screening.
- Facilitating innovative financing products, especially for adaptation finance.
- Informing local policies and corporate/investment strategies, including transition planning.
- Do No Significant Harm (DNSH) and Minimum Social Safeguards (MSS): While not fully detailed in Phase 2A for implementation guidance in this report, the consultation highlighted the need for further guidance on DNSH and MSS, including considerations for a just transition. The HKMA will provide a clear stance on their inclusion and alignment with global standards in future developments.
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Technical Details
The Phase 2A prototype of the Hong Kong Taxonomy for Sustainable Finance incorporates a range of technical terms, definitions, standards, and metrics.
- Core Definitions:
- Green Activity: Economic activities that substantially contribute to one or more environmental objectives and do not significantly harm any environmental objective.
- Transition Activity: Economic activities that are not yet aligned with a 1.5°C pathway but are progressing towards alignment or enable significant short-term emissions reductions by a designated sunset date. The entire activity can access sustainable financing.
- Transition Measure: Specific components and interventions within an activity that can partially improve emission performance, facilitating access to sustainable financing options for granular processes and technologies. Eligible only for transition CapEx and OpEx.
- Exclusion Category: Activities that are deemed not to be environmentally sustainable.
- Climate Change Mitigation: Focuses on reducing greenhouse gas emissions.
- Climate Change Adaptation: Focuses on adjusting to actual or expected climate change and its effects to moderate harm or exploit beneficial opportunities.
- Key Standards and Frameworks Referenced:
- EU Taxonomy: Used as a reference for many criteria, including emissions thresholds for electricity generation (e.g., 100 gCO2e/kWh for Green Activity).
- China's Green Bond Endorsed Project Catalogue: Referenced for interoperability.
- Multi-Jurisdiction Common Ground Taxonomy: Referenced for interoperability.
- International Standard Industrial Classification of All Economic Activities (ISIC): Codes are now included for each activity to facilitate cross-referencing.
- IEA Net Zero by 2050 Roadmap: Referenced in discussions regarding fossil gas power generation.
- Transition Pathway Initiative (TPI): Thresholds for non-OECD countries (e.g., 345 gCO2e/kWh) considered for alternative transition thresholds.
- BEAM Plus: Incorporated into criteria for data centres and building certifications.
- Building Environmental Performance (BEC) standards: Referenced for building energy efficiency thresholds.
- Mandatory Energy Efficiency Labelling Scheme (MEELS) and Voluntary Energy Efficiency Scheme (VEELS): Relevant local certifications for energy-efficient equipment.
- International Aluminium Institute (IAI): Emissions budget and pathways used for aluminium manufacture criteria.
- ISO Standards: ISO 14040, ISO 14044, ISO 14067, and ISO 19870 recommended for lifecycle assessment calculations for hydrogen production.
- Leadership in Energy and Environmental Design (LEED) v5, BREEAM v7: Considered for embodied carbon in construction.
- Intergovernmental Panel on Climate Change (IPCC), United Nations Environment Programme (UNEP), Science Based Targets initiative (SBTi): Scientific bodies referenced for embodied carbon considerations.
- Green Product Certification Scheme (Construction Industry Council): Referenced for building materials.
- China Building Material Federation: Referenced for building material standards.
- Key Metrics and Thresholds:
- Emissions Thresholds: Vary by sector. For example, 67% for newly enabled generation capacity under Green Activity for electricity transmission/distribution, aligning with the EU Taxonomy's 100 gCO2e/kWh threshold. 50% for Transition Activity aligns with Hong Kong Climate Action Plan 2050 (50% reduction by 2035).
- Grid Emissions Factor: Calculation based on a five-year historical period, aligning with global taxonomies.
- Gas Thresholds (Renewable/Low-Carbon Gases): Based on actual throughput.
- Power Usage Effectiveness (PUE): A key metric for data centres, with thresholds mapped to BEAM Plus requirements.
- Water Usage Effectiveness (WUE): Thresholds for data centres, with alternative options provided.
- Global Warming Potential (GWP) of Refrigerants: A threshold of 675 is set, aligning with global taxonomies.
- Building Efficiency Standards: Aligned with BEAM Plus requirements and BEC baselines (e.g., BEC 2018, BEC 2021).
- Aluminium Manufacture: Emissions thresholds based on IAI's 1.5°C scenario.
- Hydrogen Manufacture: "Cradle-to-site" methodology for lifecycle emissions. Monthly measurement for additional renewable electricity usage is minimum, hourly is best practice.
- Financial Metrics:
- Capital Expenditure (CapEx): Payments for goods/services to maintain or invest in assets. Taxonomy-aligned CapEx represents the proportion aligned with criteria.
- Operational Expenditure (OpEx): Short-term costs for ongoing operations. Taxonomy-aligned OpEx represents the proportion associated with aligned activities/measures.
- Revenue (Net Turnover): Money derived from sales and services. Taxonomy-aligned revenue represents the proportion of net turnover from aligned activities.
- Transition Plan Requirements:
- Activity-level transition plans: Managed reduction plans (e.g., for maritime vessels) or commitments to align with Green thresholds over time (e.g., data centres).
- Entity-level transition plans: Aligned with 1.5°C pathways for specific forward-looking technologies.
- Other Technical Considerations:
- Sunset Dates: Time-bound criteria for transition activities, e.g., 2040 for aluminium manufacture.
- Maladaptation Risks: A consideration in the adaptation framework.
- Additionality: For renewable electricity usage, temporal and geographical correlation is required.
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Appendices, Tables, and Attachments
- Figure 1: Type of respondents to Phase 2A taxonomy prototype: This figure provides a visual breakdown of the 25 respondents by their institutional type (Banks, Asset Managers, Insurance Companies, Corporates, Industry and Professional Associations, Non-government Organisations), illustrating the diverse stakeholder engagement.
- Table 1: Consultation questions of Phase 2A taxonomy prototype: This table lists the specific questions posed to stakeholders, categorized into four main areas: Taxonomy design, structure, and scope; Taxonomy methodology (mitigation and adaptation); Sector chapters (covering specific sectors and their metrics/criteria); and Taxonomy implementation.
- Table 2 (Implicit): While not explicitly numbered or titled as a table in the provided text, the breakdown of "Consultation respondents by type" visually represents the data from Figure 1, showing numerical counts for each respondent category.
- References to Figures and Tables within Chapters: The report frequently references internal figures and tables for illustrative purposes (e.g., Figure 3 mentioned in the context of hydrogen manufacture lifecycle methodology). The specific content of these internal figures and tables is not fully detailed here but is integral to the detailed explanations within the report.
This summary provides a comprehensive overview of the HKMA's Consultation Report on the Prototype of Hong Kong Taxonomy for Sustainable Finance (Phase 2A), designed to inform executive decision-making by highlighting key changes, impacts, and requirements.