This document outlines Hong Kong Taxonomy for Sustainable Finance (Phase 2A), published in January 2026. It serves as a comprehensive framework to define and classify environmentally sustainable economic activities, with the primary goal of scaling up green and sustainable finance flows to address climate change mitigation and adaptation challenges. This phase builds upon Phase 1, broadening the scope to include new sectors and introducing the critical concept of climate change adaptation.
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Document Overview
The Hong Kong Taxonomy for Sustainable Finance (Phase 2A) is a key initiative by the Hong Kong Monetary Authority (HKMA) to establish a standardized classification system for environmentally sustainable economic activities. Its purpose is to provide clarity and guidance for market participants, enabling them to make informed investment decisions, scale up capital flows towards credible green and sustainable projects, and address concerns about greenwashing. Phase 2A represents a significant expansion from Phase 1, incorporating two new carbon-intensive sectors (Manufacturing and Information and Communications Technology - ICT), expanding existing sectors (Energy and Transportation), and crucially, introducing a new environmental objective: Climate Change Adaptation. This taxonomy aims to align with international standards while catering to Hong Kong's local context, fostering sustainable finance development both regionally and globally.
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Main Content
Phase 2A of the Hong Kong Taxonomy introduces a more granular and comprehensive approach to classifying sustainable economic activities, extending beyond the initial focus on climate change mitigation to include climate change adaptation.
1. Climate Change Mitigation (Chapter II):
- Classification Framework: Activities are classified into three categories:
- Green Activity: Substantially contributes to climate change mitigation and operates at near-zero emissions or is aligned with a 1.5°C pathway.
- Transition Activity: Carbon-intensive activities on a time-bound decarbonisation journey towards net zero by 2050, or activities enabling significant short-term emissions reductions. These are time-bound with a sunset date and ineligible for new activities to prevent carbon lock-in.
- Transition Measure: A component of an activity designed to materially reduce Scope 1 and 2 emissions.
- Exclusion Category: Activities incompatible with a 1.5°C pathway, those not progressing rapidly enough, directly unsustainable activities, or those with low climate materiality.
- Key Sectors and Activities:
- Energy: Expands to seven activities, including the generation of electricity via concentrated solar power, solar photovoltaic, and wind power. It also covers transmission and distribution of electricity and renewable/low-carbon gases, electricity storage, and district heating and cooling.
- Metrics: Primarily uses gCO2e/kWh for emissions intensity. Thresholds are defined for various energy generation methods.
- Transition: For activities like electricity generation from coal, a transition pathway is defined, requiring adherence to specific emissions intensity reductions by sunset dates (e.g., 2035 for energy sector transition activities).
- Transportation: Continues to cover public transportation, personal mobility devices, and freight/passenger transport by sea. New activities include land transport by motorcycles, passenger cars, and light commercial vehicles, and low-carbon transport infrastructure.
- Transition: Specific criteria for fossil-fuel powered vehicles are detailed, with a sunset date of 2030 for transition activities in maritime transport.
- Construction: Includes construction of new buildings and renovation of existing buildings, with specific criteria for energy performance and material use.
- Waste: Covers sewage sludge treatment and collection/transport of non-hazardous waste via anaerobic digestion or co-digestion.
- Manufacturing: This is a newly introduced sector. It includes:
- Manufacture of hydrogen.
- Manufacture of equipment for hydrogen production via electrolysis.
- Alumina refining and aluminium smelting.
- Criteria: Focuses on reducing emissions intensity, energy efficiency, and material circularity. Transition activities are defined with specific sunset dates, e.g., 2035 for aluminium smelting.
- Information and Communications Technology (ICT): This is another newly introduced sector.
- Data Processing, Hosting, and Related Activities (Data Centres):
- Green Activity Criteria: Focuses on energy usage (Power Usage Effectiveness - PUE aligned with BEAM Plus New Data Centres v1.0), water usage (Water Usage Effectiveness - WUE), and low Global Warming Potential (GWP) refrigerants (cap of 675). New data centre buildings must also meet construction criteria.
- Transition Activity Criteria: Applies to retrofits and operations of existing data centres, with PUE, water usage, and GWP requirements, and a commitment to meet Green Activity criteria by 2035.
- Data-Driven Solutions for Greenhouse Gas Emissions Reductions: Focuses on ICT solutions (hardware, software, IoT, AI) that demonstrably reduce GHG emissions in other sectors or within the IT industry itself.
- Green Activity Criteria: Requires demonstrating life cycle GHG emission reductions on par with best-in-class solutions, verified by independent third parties, or improving energy efficiency/reducing emissions/maximizing product use.
2. Climate Change Adaptation (Chapter III):
- New Environmental Objective: Introduced to address actual and expected climate change impacts and build resilience.
- Adaptation Framework Principles:
- Adapting Measures-focused: Initially focuses on specific measures rather than entire activities.
- Localised for Hong Kong and Adjacent Regions: Tailored to local geographic and climatic factors.
- Building Block Approach for Phased Development: Designed for incremental expansion.
- Graduated Assessment Approach: Starts with a "Whitelist" approach for eligible adapting measures, with potential for more sophisticated criteria in the future.
- Whitelist Approach: A predefined list of adapting measures automatically deemed eligible for taxonomy alignment. These are selected based on thorough research to ensure substantial contribution to adaptation goals and minimal maladaptation risk.
- Maladaptation Risk: Defined as an unintended increase in vulnerability or exposure to climate hazards posed by an investment.
- Initial Focus Sector: Water Sector: Prioritized due to Hong Kong's vulnerability to tropical cyclones, rainstorms, and reliance on external water supply.
- Climate Hazards Addressed: Flood damage and water stress.
- Whitelisted Adapting Measures:
- **G-001: Implementation of stormwater separation** (Wastewater collection and treatment): Reduces physical vulnerability to flood damage. Associated ISIC Code: 3600, 4290.
- **G-002: Installing water metering** (Water supplies): Improves adaptive capacity through optimised water usage and loss prevention, mitigating net revenue loss due to water stress. Associated ISIC Code: 4322.
- Future Sectors: Other hazards like storm damage, mass movement damage, and heat stress will be explored for sectors like buildings, transportation, and energy infrastructure.
- Reporting Alignment: Only CapEx and OpEx can be classified as taxonomy-aligned for adaptation measures; revenue is excluded.
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Key Changes
- Introduction of Climate Change Adaptation Objective: This is the most significant addition, addressing resilience against climate impacts.
- Addition of Two New Sectors for Mitigation:
- Manufacturing: Incorporates activities like hydrogen production, alumina refining, and aluminium smelting, with defined transition pathways and sunset dates.
- Information and Communications Technology (ICT): Introduces criteria for Data Centres (PUE, WUE, GWP) and Data-Driven Solutions for emissions reduction, both Green and Transition categories for data centres.
- Expansion of Existing Sectors for Mitigation:
- Energy: Increased from three to seven activities, including new areas like district heating/cooling and renewable gas transmission.
- Transportation: Expanded to include land transport for vehicles and low-carbon transport infrastructure.
- Introduction of "Transition" Category: A crucial element for high-emitting sectors, allowing for a defined decarbonisation journey towards net zero by 2050. This includes "Transition Activities" and "Transition Measures."
- Refinement of Criteria and Thresholds: Detailed technical metrics, thresholds, and PUE/WUE/GWP values are provided for specific activities.
- Evolution of Assessment Approach for Adaptation: Initial reliance on a "Whitelist" for adapting measures, with flexibility for future expansion.
- Updated Interoperability Information: Mentions alignment with the Common Ground Taxonomy (CGT) and the Multi-Jurisdiction Common Ground Taxonomy (M-CGT).
- Emphasis on Voluntary Adoption and Future Supervisory Exploration: The Taxonomy is currently voluntary, with future exploration of incorporation into banking supervisory policies.
- Stakeholder Engagement: The development process emphasizes ongoing consultation and feedback.
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Important Dates
- Publication Date of Phase 2A: January 2026.
- Phase 1 Publication Date: May 2024.
- Carbon Neutrality Target: Before 2050.
- Phasing Out Coal for Electricity Generation: By 2035.
- Renewable Energy Share Target: 7.5% to 10% by 2035, further increasing to 15% subsequently.
- Net-Zero Electricity Generation Target: Before 2050.
- Sunset Dates for Transition Activities:
- Maritime Transport: 2030
- Energy Sector: 2035
- Data Centres (commitment to Green criteria): 2035
- Aluminium Smelting: 2035
- *Note: Specific sunset dates for other activities are implied to be aligned with the 2050 net-zero target or determined based on various factors.*
- Public Consultation on Phase 2A: September 2025 (referenced as completed).
- Data as of September 30, 2024: Used for statistics on the Government Sustainable Bond Programme (GSBP).
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Impact Scope
- Applicable Parties:
- Financial Institutions: Banks, asset managers, investors, insurance companies.
- Corporates: Companies in sectors covered by the Taxonomy, particularly those in energy, transportation, construction, manufacturing, and ICT.
- Governments and Regulators: For policy development and supervisory frameworks.
- Investors: To identify and invest in sustainable opportunities.
- Affected Institutions: All entities involved in financing, investing in, or operating within the covered sectors. This includes companies seeking green financing, those developing sustainable products, and those undertaking projects aligned with climate mitigation and adaptation goals.
- Degree of Impact:
- High: For institutions actively involved in sustainable finance, product development, and ESG reporting. The Taxonomy provides a framework for defining what constitutes a "green" or "sustainable" activity, influencing investment decisions and capital allocation.
- Moderate: For corporates not yet fully engaged in sustainable finance but operating in covered sectors. The Taxonomy can guide their transition strategies and highlight future financing opportunities and regulatory considerations.
- Informative: For the broader public and policymakers, offering transparency and clarity on sustainable finance practices.
- Voluntary Adoption: The Taxonomy is currently for voluntary adoption, but its influence is expected to grow, potentially leading to regulatory integration in the long term.
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Compliance Requirements
- Voluntary Adoption: The HKMA explicitly states the Taxonomy is designed for voluntary adoption by market participants.
- Alignment Assessment: Institutions will need to assess their activities, projects, and investments against the defined criteria and thresholds for both climate change mitigation and adaptation.
- Data and Reporting:
- Mitigation Activities: Reporting will likely involve demonstrating compliance with Green, Transition Activity, or Transition Measure criteria. This requires tracking and reporting metrics such as CapEx, OpEx, and Revenue aligned with taxonomy definitions.
- Adaptation Measures: Only CapEx and OpEx can be reported as taxonomy-aligned. Revenue is excluded.
- Verification: While not explicitly stated as a mandatory requirement for all activities, the methodology for "Data-driven solutions for GHG emissions reductions" specifically mentions verification by an independent third party. This suggests a trend towards increased assurance.
- Implementation Guidance:
- Internal Policies and Procedures: Financial institutions and corporates will need to develop or update internal frameworks, policies, and procedures to assess activities against the Taxonomy criteria.
- Capacity Building: Efforts will be needed for staff training and development to understand and apply the Taxonomy.
- Due Diligence: Enhanced due diligence processes will be required to evaluate the sustainability claims of investments and projects.
- Future Supervisory Exploration: The HKMA indicates that in the long run, the incorporation of the Taxonomy into banking supervisory policies will be explored. This suggests that while voluntary now, future compliance requirements might emerge through regulatory channels.
- Stakeholder Engagement: Ongoing participation in stakeholder consultations is encouraged to ensure the Taxonomy remains relevant and practical.
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Technical Details
- Environmental Objectives:
- Climate Change Mitigation
- Climate Change Adaptation
- Classification Categories: Green Activity, Transition Activity, Transition Measure, Exclusion Category.
- Key Metrics:
- Emissions Intensity: Grams of carbon dioxide equivalent per kilowatt-hour (gCO2e/kWh).
- Power Usage Effectiveness (PUE): For data centres, with specific thresholds for different IT loads (e.g., ≤1.35 at 100% IT load for Green Activity, ≤1.40 at 100% IT load for Transition Activity).
- Water Usage Effectiveness (WUE): For data centres, thresholds include ≤2.0 L/kWh for Green Activity and ≤2.3 L/kWh for Transition Activity.
- Global Warming Potential (GWP): For refrigerants in data centres, with a cap of 675.
- Paris Agreement Alignment: Activities are assessed against 1.5°C climate goals.
- Sunset Dates: Defined end dates for Transition Activities (e.g., 2030 for Maritime Transport, 2035 for Energy Sector, 2035 for Data Centres' commitment).
- ISIC Codes: Associated International Standard Industrial Classification of All Economic Activities codes are provided for various activities (e.g., 6311 for Data Processing, 3600/4290 for Stormwater Separation).
- International Alignment: Reference to Common Ground Taxonomy (CGT), Multi-Jurisdiction Common Ground Taxonomy (M-CGT), Climate Bonds Resilience Taxonomy (CBRT), GHG Protocol, ISO 14067:2018, ISO 14064-2:2019.
- Adaptation Framework Specifics:
- Climate Hazards: Flood Damage, Water Stress, Storm Damage, Mass Movement Damage, Heat Stress.
- Impacts of Hazard: Asset value loss, net revenue loss.
- Adaptation Outcomes: Reduced physical vulnerability, improved adaptive capacity, optimized resource utilization.
- Reporting of Taxonomy Alignment:
- Green Activity: CapEx, OpEx, Revenue.
- Transition Activity: CapEx, OpEx (Revenue is not eligible).
- Transition Measure: CapEx, OpEx (Revenue is not eligible).
- Adaptation Measures: CapEx, OpEx (Revenue is excluded).
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Attachments, Tables, and Appendices
- Figure 1: Expansion of taxonomy scope from Phase 1 to Phase 2A: Visually illustrates the inclusion of new sectors (Waste, Manufacturing, ICT) and activities compared to Phase 1.
- Table 1. Classifications under Transition category: Differentiates between Transition Activity and Transition Measure, defining their scope, time-bound nature, and reporting eligibility (CapEx/OpEx for both, Revenue only for Green Activities, not Transition).
- Table 2. Eligibility of taxonomy alignment for Green and Transition categories: Clearly outlines which expenditures (CapEx, OpEx, Revenue) are eligible for reporting taxonomy alignment under Green Activity, Transition Activity, and Transition Measure classifications.
- Figure 2. Graphic representation of activity classification: A visual timeline showing the progression from Exclusion to Transition Activity, Transition Measure, Green Activity, and eventually Net Zero.
- Table 3. Energy Sector – Activity Classification: Lists the seven activities (A-001 to A-007) classified under Green Activity and their status (newly introduced or continued from Phase 1).
- Table 4. Energy Sector – Emissions Intensity Thresholds: (Content truncated in the provided document, but it would detail specific gCO2e/kWh limits for different energy generation methods under Green and Transition categories).
- Table 16 & 17: Green/Transition PUE values required at different IT loads for Data Centres: These tables specify the maximum allowable PUE for data centres based on their IT load percentage for both Green and Transition Activity classifications.
- Table 18. Whitelisted adapting measures within Water Sector: This table details the initial set of four adapting measures in the Water Sector for climate change adaptation, including their sub-sector, measure name (G-001, G-002), associated ISIC codes, impacts of hazards (flood damage, water stress), and adaptation outcomes. It highlights that G-001 is part of the Government Sustainable Bond Programme.
- Appendix: Associated ISIC Codes: This appendix would contain a comprehensive list of ISIC codes relevant to the activities classified in the Taxonomy.
This summary provides a detailed overview of the HKMA's Hong Kong Taxonomy for Sustainable Finance (Phase 2A), covering its objectives, core content, significant changes, timelines, impact, and technical specifications for market participants.