Circular landing: 20260122-7-EN

This document summarizes the Hong Kong Monetary Authority's (HKMA) circular dated 22 January 2026, announcing the publication of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). This circular is a critical announcement for all Authorized Institutions (AIs) in Hong Kong, detailing a significant step in the HKMA's ongoing efforts to promote sustainable finance and facilitate the transition to a low-carbon economy.

• Nature of Document: This is an official circular issued by the HKMA's Banking Policy Department to all Authorized Institutions.
• Purpose: The primary purpose of this circular is to formally announce the publication of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). It aims to inform AIs about this new framework, its objectives, its potential applications, and the HKMA's ongoing commitment to its development. The circular also serves to encourage AIs to adopt and utilize the Taxonomy.

The core of this circular lies in the announcement of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). This Taxonomy represents an evolution of the HKMA's strategy to build a robust and transparent framework for identifying and classifying economic activities that contribute to green and sustainable development within Hong Kong.

The development of the Hong Kong Taxonomy has been a phased approach:

• Phase 1: Released in May 2024. This initial phase laid the groundwork for the Taxonomy.
• Phase 2A Prototype: A prototype for Phase 2A was released on 8 September 2025 for public consultation. This phase aimed to expand the coverage and introduce enhancements to the Taxonomy.
• Phase 2A (Published): Following the public consultation, the HKMA has refined the Phase 2A Prototype based on the feedback received. This refined version is now published as the official Hong Kong Taxonomy (Phase 2A).

The HKMA explicitly encourages Authorized Institutions to adopt the Hong Kong Taxonomy for various applications, including:

• Assessing Greenness and Transition Attributes: Evaluating the environmental credentials and transition readiness of projects and assets.
• Product Labelling: Providing clear and credible labels for sustainable financial products.
• Product Development: Guiding the creation of new sustainable finance offerings.
• Identification: Identifying sustainable investments and activities.
• Disclosures: Informing sustainability-related reporting to stakeholders.
• Risk Management: Integrating sustainability considerations into risk assessment frameworks.
• Investment Guidance: Providing direction for investment decisions aligned with sustainability goals.

The HKMA emphasizes that the Hong Kong Taxonomy is a "living document." This signifies that it is intended to be dynamic and will undergo continuous development. Future phases are already in progress, and their direction will be shaped by:

• Market developments
• Government policies
• Industry priorities
• Technological advancements
• Ongoing stakeholder engagement

The HKMA commits to maintaining dialogue with relevant stakeholders to ensure the Taxonomy remains relevant and effective. The circular also refers to two key linked documents:

1. Hong Kong Taxonomy: Phase 2A: The official published document itself, accessible via a provided URL.
2. Consultation Report: A summary of the feedback received during the Phase 2A public consultation and the HKMA's responses to this feedback, also accessible via a provided URL.

The primary and most significant "new policy" or "new requirement" implied by this circular is the publication and encouraged adoption of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). While the circular doesn't mandate immediate compliance in the form of a new regulatory requirement, it strongly encourages its use.

Key changes and updates embodied by Phase 2A include:

• Expanded Taxonomy Coverage: Phase 2A builds upon Phase 1, likely including a broader range of economic activities and sectors relevant to sustainable development in Hong Kong.
• Refined Criteria and Definitions: Based on public consultation, the criteria for classifying activities as "green" or contributing to "transition" have been refined for greater clarity, robustness, and practical applicability.
• Enhanced Practical Application: The focus on specific applications (product labelling, risk management, etc.) suggests that Phase 2A provides more actionable guidance for AIs to integrate the Taxonomy into their business operations.
• Consideration of Stakeholder Feedback: The publication of Phase 2A explicitly acknowledges and incorporates feedback from a public consultation, indicating a responsive and iterative development process.
• Focus on Transition: The emphasis on "transition attributes" highlights the Taxonomy's role in supporting economic activities that are not yet fully green but are on a credible path to decarbonization.

• Publication Date of Circular: 22 January 2026
• Publication Date of Hong Kong Taxonomy (Phase 2A): 22 January 2026 (stated as "published today" in the circular).
• Release Date of Phase 1: May 2024
• Release Date of Phase 2A Prototype (for public consultation): 8 September 2025
• Transition Periods / Deadlines: The circular does not specify any mandatory deadlines or transition periods. However, the language "encourages authorised institutions to use" suggests that adoption is voluntary at this stage, with an implied expectation of gradual integration by the market. The ongoing development ("subsequent phases are underway") indicates a long-term perspective rather than immediate, stringent compliance.

• Applicable Parties: All Authorized Institutions (AIs) in Hong Kong. This includes banks, restricted license banks, and deposit-taking companies licensed by the HKMA.
• Affected Institutions: Primarily AIs that are involved in lending, investment, product development, and risk management related to economic activities that can be classified under the Taxonomy. This can span across corporate banking, retail banking, investment banking, and asset management arms of these institutions.
• Degree of Impact:
• High for proactive institutions: AIs that are already actively engaged in sustainable finance or aim to be leaders in this space will find the Taxonomy a crucial tool for aligning their strategies, products, and disclosures.
• Moderate for others: Institutions that are less advanced in sustainable finance may need to invest in understanding the Taxonomy, assessing its relevance to their portfolios, and potentially developing internal capabilities to utilize it.
• Indirect impact on clients: While AIs are the direct recipients of the circular, their clients (corporates, project developers) will be indirectly impacted as AIs begin to assess their activities and projects against the Taxonomy's criteria when considering financing or investment.

The circular does not impose mandatory compliance requirements at this stage. Instead, it strongly encourages the use of the Hong Kong Taxonomy.

However, to effectively leverage the Taxonomy and align with the HKMA's intent, AIs should consider the following steps:

• Familiarization and Understanding: Thoroughly review the published Hong Kong Taxonomy (Phase 2A) and the accompanying Consultation Report to understand its scope, criteria, definitions, and intended applications.
• Internal Assessment: Assess the current state of their portfolios and business activities against the Taxonomy's classifications. Identify areas where the Taxonomy can be applied to assess greenness and transition attributes.
• Strategic Integration: Consider how to integrate the Taxonomy into their sustainable finance strategies, product development roadmaps, and risk management frameworks.
• Capacity Building: Invest in training and developing internal expertise on sustainable finance and the Taxonomy to enable effective application.
• Disclosure and Reporting: Explore how the Taxonomy can inform their sustainability disclosures and reporting to stakeholders, enhancing transparency and credibility.
• Engagement with HKMA: Maintain dialogue with the HKMA and other stakeholders regarding the Taxonomy's development and practical implementation.
• Reporting Requirements: While no specific new reporting requirements are mandated in this circular, AIs should be aware that the increasing use of such taxonomies may lead to future disclosure expectations from regulators and market participants.

The circular itself is a high-level announcement and does not delve into granular technical details. These would be found within the primary document: the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). Based on the context of such taxonomies, we can infer the types of technical details it would contain:

• Definition of Sustainable Activities: Criteria for classifying economic activities as "green" (i.e., contributing substantially to environmental objectives).
• Definition of Transition Activities: Criteria for classifying economic activities that are not yet green but are essential for a transition to a low-carbon and climate-resilient economy, and have clearly defined pathways and targets for decarbonization.
• Environmental Objectives: Likely aligned with internationally recognized environmental objectives such as:
• Climate Change Mitigation
• Climate Change Adaptation
• Protection and Restoration of Biodiversity and Ecosystems
• Sustainable Use and Protection of Water and Marine Resources
• Transition to a Circular Economy
• Pollution Prevention and Control
• Technical Screening Criteria (TSCs): Specific, quantitative, and qualitative thresholds that economic activities must meet to be classified as sustainable. These would be sector-specific and include metrics related to emissions, energy efficiency, resource use, waste management, etc.
• Do No Significant Harm (DNSH) Principle: Criteria ensuring that an economic activity, while contributing to one environmental objective, does not significantly harm any other environmental objective.
• Minimum Social Safeguards (MSS): Principles and criteria to ensure that the economic activity respects human rights and labor standards.
• Sectoral Coverage: A list of specific economic sectors and sub-sectors for which criteria have been developed (e.g., energy, transport, manufacturing, buildings, ICT, waste management).
• Methodologies for Assessment: Guidance on how to assess activities against the TSCs and DNSH criteria.
• Alignment with International Standards: Potential reference to or alignment with international initiatives such as the EU Taxonomy, the International Capital Market Association (ICMA) Green Bond Principles, or the Climate Bonds Standard.
• Key Terms and Definitions: Precise definitions of terms like "green," "sustainable," "transition," "low-carbon," etc., as used within the Taxonomy.
• Metrics and Indicators: Specific quantifiable metrics (e.g., tonnes of CO2e per unit of output, kWh of renewable energy generated, percentage of recycled content) and qualitative indicators used for screening.

Note: As the circular itself does not contain these granular technical details, the summary above describes the *likely* content of the published Taxonomy document, which is referenced by the circular.

The circular itself does not contain any direct attachments, tables, or appendices within the provided text. However, it explicitly references two crucial documents:

1. Hong Kong Taxonomy: Phase 2A: This is the primary document being announced and contains the full details of the Taxonomy. It is accessible via the provided URL: https://brdr.hkma.gov.hk/eng/doc-ldg/docId/20260122-5-EN.
2. Consultation Report: This document summarizes the feedback received during the public consultation for Phase 2A and the HKMA's responses. It is accessible via the provided URL: https://brdr.hkma.gov.hk/eng/doc-ldg/docId/20260122-3-EN.

For a comprehensive understanding of Phase 2A and its implications, these two referenced documents are essential. The summary provided here serves as a high-level executive overview based on the HKMA's circular announcement.