This document is a circular from the Hong Kong Monetary Authority (HKMA) to all Authorized Institutions, dated January 22, 2026. It announces the publication of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A).
Here's a comprehensive summary:
Summary of HKMA Circular: Publication of Hong Kong Taxonomy for Sustainable Finance (Phase 2A)
Document Overview
This circular from the Hong Kong Monetary Authority (HKMA) serves to formally announce and disseminate the publication of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). The primary purpose of this document is to inform Authorized Institutions (AIs) about the release of this expanded taxonomy, which is a crucial step in fostering green and sustainable capital flows within Hong Kong and supporting the region's transition towards a low-carbon economy. It provides a framework for classifying economic activities that contribute to sustainable development.
Main Content
The core of this circular lies in the formal release of Phase 2A of the Hong Kong Taxonomy for Sustainable Finance. This phase represents an expansion and refinement of the existing framework, building upon the foundation laid by Phase 1, which was published in May 2024.
The HKMA has developed the Hong Kong Taxonomy through a phased approach, ensuring a robust and transparent methodology for identifying and classifying economic activities that align with green and sustainable objectives. Following the initial release of Phase 1, the HKMA conducted a public consultation on a Phase 2A Prototype from September 8, 2025. This consultation aimed to gather feedback from the market and stakeholders on the proposed expansions in taxonomy coverage and other enhancements.
Phase 2A has been developed and refined based on the valuable feedback received during this public consultation. The circular highlights that the HKMA has also published a separate Consultation Report which meticulously summarizes the feedback received and the HKMA's corresponding responses.
The HKMA strongly encourages Authorized Institutions to adopt and utilize the Hong Kong Taxonomy (Phase 2A) across a broad spectrum of their operations. These applications include, but are not limited to:
- Assessing the greenness and transition attributes of projects and assets.
- Product labelling for financial products.
- Product development initiatives.
- Identification of sustainable investments.
- Disclosure requirements and reporting.
- Risk management processes related to sustainability.
- Investment guidance for clients and internal portfolios.
The HKMA emphasizes that the Hong Kong Taxonomy is designed as a living document. This means it is intended to evolve and adapt over time. The development of subsequent phases is already underway, and their direction will be continuously informed by a range of factors:
- Market developments: Emerging trends and innovations in sustainable finance.
- Government policies: Aligning with national and regional climate and sustainability agendas.
- Industry priorities: Responding to the evolving needs and strategies of the financial sector.
- Technological advancements: Incorporating new technologies that enable sustainability.
- Ongoing stakeholder engagement: Maintaining a continuous dialogue with market participants, regulators, and civil society.
The HKMA reiterates its commitment to ongoing dialogue with relevant stakeholders through appropriate channels to further enhance and develop the Hong Kong Taxonomy.
Key Changes
The primary and most significant change announced in this circular is the publication of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). This represents a substantial expansion and refinement of the existing taxonomy framework. While specific details of the expanded coverage and enhancements are not detailed within this circular itself, they are implicitly addressed through the reference to the public consultation on the Phase 2A Prototype. Key elements of the changes embodied in Phase 2A are:
- Expanded Taxonomy Coverage: Phase 2A introduces new economic activities and sectors to the taxonomy, broadening its scope beyond what was covered in Phase 1. This expansion is a direct result of the public consultation process and aims to encompass a wider range of activities contributing to sustainable development.
- Refined Criteria and Methodologies: The consultation feedback has led to refinements in the criteria, methodologies, and thresholds used to classify activities as sustainable or contributing to transition. This ensures greater precision and applicability of the taxonomy.
- Integration of Feedback: The final version of Phase 2A incorporates feedback received from market participants, industry experts, and other stakeholders during the consultation period, making it more practical and relevant to the Hong Kong market.
- Emphasis on "Transition" Attributes: The circular explicitly mentions the assessment of "transition attributes," indicating that Phase 2A likely includes or refines criteria for economic activities that, while not immediately green, are crucial for enabling the transition to a low-carbon economy.
- Operationalization of the Taxonomy: The circular strongly encourages AIs to actively use the Taxonomy for practical applications, signifying a move towards greater operationalization and market adoption.
Important Dates
- May 2024: Publication of Phase 1 of the Hong Kong Taxonomy for Sustainable Finance.
- September 8, 2025: Launch of the public consultation on the Phase 2A Prototype of the Hong Kong Taxonomy.
- January 22, 2026: Publication date of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A) and the associated circular. This is the official release date.
- Ongoing: Development of subsequent phases of the Hong Kong Taxonomy is underway, with continuous updates expected.
Impact Scope
The impact of this circular and the published Hong Kong Taxonomy (Phase 2A) is primarily directed towards:
- All Authorized Institutions (AIs): This includes banks, deposit-taking companies, and other entities licensed by the HKMA. They are the direct recipients of the circular and are strongly encouraged to adopt the taxonomy.
- The broader financial market: While the circular is addressed to AIs, the adoption of the taxonomy will have ripple effects across the financial ecosystem, influencing investment strategies, product offerings, and disclosure practices of other market participants.
- Issuers of sustainable finance products: Companies and projects seeking to issue green bonds, sustainability-linked loans, or other sustainable finance instruments will likely find the taxonomy a useful benchmark for aligning their offerings.
- Investors: Investors will benefit from a more standardized and transparent framework for identifying and assessing sustainable investments.
The degree of impact is expected to be significant, particularly for AIs actively involved in or looking to expand their sustainable finance activities. The taxonomy provides a common language and framework, facilitating clearer communication, reducing greenwashing risks, and enabling more efficient allocation of capital towards sustainable initiatives. For institutions that are already engaged in ESG (Environmental, Social, and Governance) practices, this taxonomy offers a structured approach to further enhance their efforts. For those beginning their journey, it provides a clear roadmap and set of standards to follow.
Compliance Requirements
While this circular does not impose mandatory compliance requirements for the immediate adoption of the Hong Kong Taxonomy, it strongly encourages Authorized Institutions to use it. The HKMA's stance suggests a forward-looking approach where adoption is seen as a best practice and a key enabler of sustainable finance.
However, based on the HKMA's proactive stance and the nature of regulatory guidance, AIs should consider the following as proactive compliance and implementation steps:
- Familiarization and Understanding: All relevant personnel within AIs should familiarize themselves with the content and methodology of the Hong Kong Taxonomy (Phase 2A). This includes understanding the criteria for defining environmentally sustainable economic activities and those that contribute to transition.
- Internal Policy Review and Update: AIs should review their internal policies, procedures, and risk management frameworks to identify how the taxonomy can be integrated. This may involve updating investment guidelines, credit assessment processes, and product development frameworks.
- Capability Building: Investing in training and development for staff involved in sustainability assessment, product development, risk management, and reporting to ensure they have the necessary expertise to apply the taxonomy.
- Pilot Testing and Application: AIs are encouraged to begin piloting the use of the taxonomy in various applications, as outlined in the main content (product labelling, disclosures, risk management, etc.). This practical application will help identify challenges and refine internal processes.
- Monitoring Regulatory Developments: While not mandatory compliance *yet*, staying abreast of any future regulatory requirements or expectations related to taxonomy adoption will be crucial. The HKMA's continuous development of the taxonomy suggests a trajectory towards greater integration into the regulatory landscape.
- Reporting (Implied): While not explicitly stated as a mandatory reporting requirement in this circular, the encouragement for use in "disclosures" implies that AIs may need to be prepared to provide information on how they are using the taxonomy in their sustainability reporting or in disclosures related to their portfolios. The HKMA will likely provide further guidance on reporting requirements in due course.
Technical Details
The circular does not delve into granular technical details of the taxonomy's criteria within its text. However, it refers to the Hong Kong Taxonomy for Sustainable Finance (Phase 2A) itself as the primary source for these details. Interested parties are directed to access the taxonomy via a specific URL:
- Hong Kong Taxonomy: https://brdr.hkma.gov.hk/eng/doc-ldg/docId/20260122-5-EN
The taxonomy, as a technical document, is expected to contain:
- Definitions of Sustainable Economic Activities: Precise criteria and thresholds for classifying economic activities as environmentally sustainable. This would typically involve defining specific sectors, sub-sectors, and activities that meet predetermined environmental objectives (e.g., climate change mitigation, adaptation, circular economy, pollution prevention, biodiversity protection).
- Criteria for "Transition" Activities: Definitions and requirements for economic activities that contribute to the transition to a low-carbon and climate-resilient economy. This would include activities that enable decarbonization in hard-to-abate sectors, for example.
- Technical Screening Criteria (TSCs): Specific, quantifiable performance benchmarks that an economic activity must meet to be considered environmentally sustainable. These are likely to be science-based and aligned with international best practices.
- Do No Significant Harm (DNSH) Principles: Criteria to ensure that an activity, even if contributing to a sustainability objective, does not cause significant harm to other environmental objectives.
- Minimum Social Safeguards: Provisions to ensure that economic activities adhere to minimum social standards, such as respect for human rights and labour standards.
- Methodology for Classification: Details on how to apply the taxonomy to specific projects, assets, and corporate activities.
- Linkages to International Standards: Potential alignment or harmonization with international taxonomies and standards (e.g., EU Taxonomy, ICMA principles).
The Consultation Report (accessible at https: //brdr.hkma.gov.hk/eng/doc-ldg/docId/20260122-3-EN) would provide further context on the development of these technical details, outlining the feedback received on specific criteria and the HKMA's rationale for their inclusion or modification.
In summary, this HKMA circular marks a significant advancement in Hong Kong's commitment to sustainable finance. By formally publishing Phase 2A of the Hong Kong Taxonomy, the HKMA provides a critical tool for market participants to identify, measure, and scale up their contributions to a greener and more sustainable future.