Summary of HKMA Circular B1/15C, B9/197C: Publication of Hong Kong Taxonomy for Sustainable Finance (Phase 2A)
Document Overview
This circular, dated 22 January 2026, from the Hong Kong Monetary Authority (HKMA) to all Authorised Institutions (AIs), formally announces the publication of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). The primary purpose of this circular is to inform AIs about the release of this expanded taxonomy, which is a critical tool designed to facilitate green and sustainable capital flows and support Hong Kong's transition to a low-carbon economy. The circular also highlights the HKMA's ongoing commitment to developing the taxonomy in phases and encourages AIs to adopt it in various applications.
Main Content
The core of this circular is the formal launch of Phase 2A of the Hong Kong Taxonomy for Sustainable Finance. This release represents a significant advancement from Phase 1, published in May 2024, by expanding the scope of economic activities covered and incorporating enhancements based on market feedback.
The HKMA has been strategically developing the Hong Kong Taxonomy in phases to establish a robust and transparent framework for classifying economic activities that contribute to green and sustainable development. Following the initial release of Phase 1, a public consultation on a Phase 2A Prototype was conducted from 8 September 2025. This consultation aimed to gather feedback from the public and industry stakeholders on the proposed expansion of the taxonomy's coverage and associated refinements.
The HKMA has meticulously reviewed the feedback received during the public consultation and has subsequently refined the Phase 2A Prototype into the officially published Hong Kong Taxonomy (Phase 2A). Alongside the taxonomy itself, the HKMA has also released a Consultation Report, which provides a comprehensive summary of the consultation feedback and the HKMA's responses and decisions.
The HKMA strongly encourages authorised institutions to adopt and utilize the Hong Kong Taxonomy for a range of critical applications. These include, but are not limited to:
- Assessing the greenness and transition attributes of projects and assets. This implies evaluating how well investments align with sustainability objectives and their contribution to the low-carbon transition.
- Product labelling: Ensuring clarity and consistency in how sustainable finance products are identified and communicated to the market.
- Product development: Guiding the creation of new financial products that meet sustainability criteria.
- Identification: Identifying economic activities that qualify as sustainable or enabling for the transition.
- Disclosures: Providing a standardized basis for reporting on sustainability-related activities and investments.
- Risk management: Integrating environmental, social, and governance (ESG) risks into financial risk assessment frameworks.
- Investment guidance: Informing investment decisions and portfolio construction with a focus on sustainability.
The circular emphasizes that the Hong Kong Taxonomy is a living document. This signifies that its development is an ongoing process, with subsequent phases already under development. The future evolution of the taxonomy will be driven by a dynamic interplay of factors, including:
- Market developments: Evolving trends and innovations in the sustainable finance market.
- Government policies: National and regional policies related to climate change, environmental protection, and sustainable development.
- Industry priorities: The evolving needs and strategies of various industry sectors.
- Technological advancements: New technologies that enable or contribute to sustainable activities.
- Ongoing stakeholder engagement: Continuous dialogue and collaboration with all relevant stakeholders.
The HKMA reiterates its commitment to maintaining open dialogue with relevant stakeholders through appropriate channels as the Hong Kong Taxonomy continues to be further developed.
Key Changes
The primary and most significant change announced by this circular is the publication of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). This is not merely an update but an expansion of the existing framework. The key changes and new requirements introduced with Phase 2A are not explicitly detailed in this circular document itself, but are inherent in the publication of the expanded taxonomy and the accompanying Consultation Report. However, based on the context provided:
- Expanded Scope of Economic Activities: Phase 2A introduces classifications for additional economic activities that contribute to green and sustainable development, beyond what was covered in Phase 1.
- Refined Criteria and Methodologies: The taxonomy has been refined based on public consultation feedback, likely resulting in updated or more precise criteria, technical screening criteria (TSCs), and potentially disclosure requirements for qualifying activities.
- Enhanced Transition Attributes: The focus on supporting the transition to a low-carbon economy is likely further elaborated with specific criteria for activities that are not yet green but are crucial enablers of the transition.
- Formalization of Public Consultation Outcomes: The publication of the Consultation Report signifies the formal incorporation of feedback and the HKMA's decisions on how to address stakeholder input into the taxonomy.
Important Dates
- Publication Date of Hong Kong Taxonomy (Phase 2A): Today, 22 January 2026.
- Publication Date of Phase 1: May 2024.
- Start Date of Public Consultation on Phase 2A Prototype: 8 September 2025.
- Effective Date of Hong Kong Taxonomy (Phase 2A): While not explicitly stated as an "effective date" for mandatory compliance in this circular, the publication date signifies that AIs are now encouraged to *use* the taxonomy. The circular implies immediate applicability for voluntary adoption and guidance. Specific mandatory implementation timelines, if any, would likely be detailed in the taxonomy document itself or subsequent circulars.
- Transition Periods: No specific transition periods are mentioned in this circular. However, given the nature of taxonomy adoption, it's implied that AIs will be expected to progressively integrate it into their operations.
Impact Scope
- Applicable Parties: All Authorised Institutions (AIs), as explicitly addressed in the circular. This includes licensed banks, restricted licensed banks, and deposit-taking companies operating in Hong Kong.
- Affected Institutions: All financial institutions that engage in lending, investment, product development, risk management, and disclosure related to sustainable finance activities.
- Degree of Impact: The impact is expected to be significant, particularly for AIs that are actively involved or intend to be involved in sustainable finance. The taxonomy provides a common language and benchmark, influencing:
- Strategic decision-making: Guiding the allocation of capital towards sustainable and transition-aligned activities.
- Product innovation: Driving the development of new green and sustainable finance products.
- Risk management practices: Enhancing the assessment and management of climate-related and other ESG risks.
- Reporting and disclosure: Standardizing the way AIs report on their sustainable finance activities, potentially aligning with international best practices.
- Operational processes: Requiring adjustments to internal systems and processes for data collection, analysis, and reporting related to sustainability.
Compliance Requirements
This circular from the HKMA is an announcement and recommendation, rather than a set of mandatory compliance rules at this stage. Therefore, the compliance requirements are primarily focused on voluntary adoption and guidance:
- Encouraged Use: AIs are strongly encouraged to use the Hong Kong Taxonomy for assessing the greenness and transition attributes of projects and assets.
- Application in Various Areas: AIs should consider integrating the taxonomy into their existing frameworks for:
- Product labelling
- Product development
- Identification of sustainable activities
- Disclosures
- Risk management
- Investment guidance
- Familiarization with Taxonomy Document and Consultation Report: AIs are expected to thoroughly review the published Hong Kong Taxonomy (Phase 2A) and the accompanying Consultation Report to understand the detailed criteria, definitions, and methodologies.
- Ongoing Engagement: AIs should remain engaged with the HKMA's ongoing development of the taxonomy and provide feedback through established channels as further phases are released.
- Reporting Requirements: The circular does not specify new mandatory reporting requirements *directly* related to the taxonomy's publication. However, the use of the taxonomy for disclosures implies that AIs' future sustainability disclosures may be benchmarked against it, leading to increased transparency and comparability. Any direct reporting obligations would likely be communicated in subsequent circulars or updates to existing regulatory frameworks.
Technical Details
While the circular itself is a high-level communication, it refers to a technical document, the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). The technical details contained within that document are crucial. Based on the nature of taxonomies, these would typically include:
- Definitions of Sustainable Activities: Clear and precise definitions of economic activities that are considered environmentally sustainable (e.g., contribute to climate change mitigation, adaptation, protection of natural resources).
- Technical Screening Criteria (TSCs): Quantitative and qualitative thresholds that an economic activity must meet to be considered environmentally sustainable. These often include:
- Contribution to a substantial environmental objective: For example, contributing to climate change mitigation or adaptation.
- Do No Significant Harm (DNSH): Ensuring that the activity does not cause significant harm to other environmental objectives.
- Minimum Social Safeguards: Adherence to international standards and guidelines on human rights, labor standards, and anti-corruption.
- Transition Activities: Specific criteria for economic activities that do not yet meet the definition of sustainable but are crucial for the transition to a sustainable economy (e.g., supporting renewable energy infrastructure, decarbonization of industrial processes).
- Enabling Activities: Activities that enable other activities to contribute to sustainability objectives (e.g., technology development for renewable energy).
- Classification Framework: A hierarchical structure for categorizing economic activities, often aligned with standard industrial classifications (e.g., NACE or ISIC codes).
- Methodologies for Assessment: Guidance on how to assess whether an economic activity meets the taxonomy's criteria.
- Data Requirements: Information required to demonstrate compliance with the taxonomy's criteria, which could involve metrics related to emissions, resource consumption, waste generation, etc.
- Specific Sectors and Sub-sectors: The taxonomy will detail covered sectors and sub-sectors, potentially including energy, transport, buildings, manufacturing, waste management, water, agriculture, forestry, and climate adaptation.
- Links to International Standards: Potential alignment or references to international frameworks such as the EU Taxonomy or other global sustainable finance standards.
Specific numbers, percentages, amounts, ratios, and specific data are not provided within this high-level circular. These technical details are expected to be found within the actual Hong Kong Taxonomy (Phase 2A) document itself and its accompanying Annexes.
Attachments, Tables, or Appendices Summary
The circular mentions two key publications:
- Hong Kong Taxonomy: Phase 2A: This is the primary technical document. Its content would include the detailed classification of economic activities, the technical screening criteria, definitions, methodologies, and potentially examples.
- Link: https://brdr.hkma.gov.hk/eng/doc-ldg/docId/20260122-5-EN
- Consultation Report: This document provides a summary of the public consultation process for the Phase 2A Prototype. It would detail:
- The feedback received from various stakeholders (e.g., AIs, industry associations, NGOs).
- The HKMA's analysis of this feedback.
- The HKMA's responses and decisions, explaining how the feedback influenced the final version of the Hong Kong Taxonomy (Phase 2A).
- Link: https://brdr.hkma.gov.hk/eng/doc-ldg/docId/20260122-3-EN
While this summary outlines the purpose and implications of the circular, executives should refer to the linked documents for the comprehensive technical specifications and detailed guidance on the Hong Kong Taxonomy for Sustainable Finance (Phase 2A).