Hong Kong Taxonomy for Sustainable Finance (Phase 2A)

Here is a comprehensive and detailed summary of the HKMA Circular concerning the Hong Kong Taxonomy for Sustainable Finance (Phase 2A):

Document Reference: B1/15C, B9/197C
Date: 22 January 2026
Issued By: Banking Policy Department, Hong Kong Monetary Authority (HKMA)
Addressed To: The Chief Executive, All Authorised Institutions

---

This circular announces the publication of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A) by the Hong Kong Monetary Authority (HKMA) on 22 January 2026. The purpose of this Taxonomy is to establish a robust and transparent framework for classifying economic activities that contribute to green and sustainable development. This publication represents a significant step in the HKMA's ongoing efforts to facilitate green and sustainable capital flows and to support Hong Kong's transition towards a low-carbon economy.

The Hong Kong Taxonomy is being developed in phases. Phase 2A builds upon the foundation laid by Phase 1, which was released in May 2024. The development of Phase 2A involved a public consultation process initiated on 8 September 2025, on a prototype, to gather feedback from the market and stakeholders. The final Phase 2A is a refined version incorporating the insights from this consultation.

The circular also notes the concurrent release of a Consultation Report that details the feedback received during the public consultation and the HKMA's responses to these inputs.

---

The core content of this circular is the official release of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). This Taxonomy serves as a classification system designed to identify and define economic activities that are considered environmentally sustainable or contribute to the transition to a sustainable economy.

Key aspects of the Hong Kong Taxonomy (Phase 2A) include:

• Expanded Coverage: Phase 2A significantly expands the scope of economic activities covered by the Taxonomy beyond Phase 1. While specific details of the expanded coverage are elaborated within the Taxonomy document itself (linked in the circular), the circular highlights that this expansion is a direct response to market needs and evolving priorities for sustainable finance.
• Enhanced Framework: The Taxonomy incorporates enhancements derived from the public consultation. These enhancements aim to improve the Taxonomy's practicality, clarity, and effectiveness in real-world applications.
• Guidance for Application: The HKMA strongly encourages authorised institutions (AIs) to adopt the Hong Kong Taxonomy. It is intended for use in a variety of applications, including:
• Product Labelling: To clearly identify and market sustainable finance products.
• Product Development: To inform the creation of new green and sustainable financial instruments.
• Identification: To identify projects and assets that align with sustainability criteria.
• Disclosures: To provide a common language for reporting on sustainability performance.
• Risk Management: To assess and manage sustainability-related risks within portfolios.
• Investment Guidance: To guide investment decisions towards sustainable opportunities.
• "Living Document" Approach: The HKMA emphasizes that the Hong Kong Taxonomy is a dynamic instrument. Its development is an ongoing process, with subsequent phases already in progress. Future iterations will be shaped by:
• Market developments and innovations in sustainable finance.
• Evolving government policies and regulatory landscapes.
• Industry priorities and emerging best practices.
• Technological advancements impacting sustainability.
• Continuous stakeholder engagement and feedback.
  The HKMA commits to maintaining open dialogue with relevant stakeholders throughout this iterative development process.

The circular itself does not contain the full Taxonomy but serves as the official notification of its publication and provides the necessary links for AIs to access the document and the consultation report.

---

The publication of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A) introduces several key changes and new requirements for authorised institutions:

• New Classification Standard: The primary new requirement is the availability and expected adoption of a formalised classification standard for sustainable economic activities. This standard provides a structured way to define what constitutes "green" or "transition" activities.
• Expanded Taxonomy Scope: Phase 2A significantly broadens the range of economic activities covered by the Taxonomy compared to Phase 1. This means AIs will have a more comprehensive tool to assess a wider array of sustainability-related investments and projects.
• Refined Criteria and Methodologies: Based on the public consultation, the criteria, thresholds, and methodologies within the Taxonomy have been refined. This aims to ensure greater alignment with market expectations and enhance the practical applicability of the Taxonomy.
• Emphasis on Transition Finance: While not explicitly detailed in the circular, the term "transition attributes" suggests that Phase 2A likely includes provisions for activities that support the transition to a low-carbon economy, not just inherently "green" activities. This is a critical element for many industries needing to decarbonise.
• Mandatory Encouragement for Adoption: While not a strict mandate to *comply* with the Taxonomy's classification in all instances from day one, the HKMA strongly *encourages* its use. This implies that AIs should proactively integrate the Taxonomy into their internal processes and external communications.
• Transparency in Taxonomy Development: The release of the Consultation Report signifies a commitment to transparency in how the Taxonomy is developed, detailing the feedback received and the HKMA's rationale for its decisions.

---

• Publication Date of Hong Kong Taxonomy (Phase 2A): 22 January 2026. This is the date the Taxonomy became officially available.
• Phase 1 Release Date: May 2024. This serves as a reference point for the preceding stage of the Taxonomy development.
• Public Consultation on Phase 2A Prototype Start Date: 8 September 2025. This marks the beginning of the feedback period that informed the final Phase 2A.
• Effective Date for Adoption: While the circular does not specify a hard deadline for mandatory compliance or a specific "effective date" for full implementation, the strong encouragement for use from the publication date (22 January 2026) implies that AIs should begin the process of familiarisation and integration immediately. The nature of a "living document" also suggests ongoing updates and refinements, with future effective dates for new phases to be announced.

---

The circular is addressed to All Authorised Institutions (AIs), meaning it directly impacts:

• Banks: All licensed banks operating in Hong Kong.
• Other Deposit-Taking Companies: Such as restricted licence banks and wholesale banks.
• Other entities supervised by the HKMA that undertake activities relevant to sustainable finance.

Degree of Impact:

The impact on AIs is likely to be significant and multi-faceted. The degree of impact will vary depending on the AI's current level of engagement in sustainable finance and its existing frameworks.

• High Impact: AIs that are actively developing or marketing green and sustainable finance products, those with significant investment portfolios exposed to environmental risks, or those seeking to enhance their ESG (Environmental, Social, and Governance) disclosures.
• Moderate Impact: AIs that are beginning to explore sustainable finance opportunities or are in the early stages of integrating ESG considerations into their risk management.
• Lower Impact (initially): AIs with limited current exposure to sustainable finance activities, although they are still expected to familiarise themselves with the Taxonomy due to its strategic importance and potential future implications.

The Taxonomy's influence extends beyond direct compliance. It is expected to shape market practices, investor expectations, and potentially regulatory requirements in the future, making proactive engagement beneficial for all AIs.

---

While the circular strongly *encourages* the use of the Hong Kong Taxonomy, it does not explicitly state mandatory compliance requirements or deadlines within the text of the circular itself. However, the encouragement implies certain expected actions from Authorised Institutions:

• Familiarisation and Understanding: AIs are expected to thoroughly read and understand the Hong Kong Taxonomy (Phase 2A) document.
• Integration into Processes: AIs should explore how to integrate the Taxonomy into their relevant business functions, including:
• Product Development and Design: Ensuring new products align with the Taxonomy's definitions.
• Risk Management: Using the Taxonomy to assess and manage sustainability risks associated with assets and projects.
• Reporting and Disclosure: Potentially aligning external reporting with Taxonomy classifications where applicable.
• Investment Strategy: Informing investment decisions based on the Taxonomy's criteria.
• Internal Governance: Establishing or reviewing internal policies and procedures to support the adoption of the Taxonomy.
• Capacity Building: Undertaking training and development for relevant staff to understand and apply the Taxonomy.
• Engagement with HKMA: Participating in future dialogues and consultations on the further development of the Taxonomy as it evolves.

Reporting Requirements:

• The circular does not specify any new immediate reporting requirements directly tied to the use of the Taxonomy in this release.
• However, the Taxonomy's intended use in "disclosures" suggests that AIs may, in the future, be expected to report on their alignment with Taxonomy criteria, either through voluntary disclosures or as part of future regulatory expectations.

Implementation Guidance:

• The HKMA provides links to the Taxonomy document and the Consultation Report, which are the primary sources of implementation guidance.
• The "living document" nature implies that AIs should monitor future communications from the HKMA regarding updates and further guidance.
• The HKMA's commitment to ongoing dialogue indicates that AIs can seek clarification and provide feedback through established channels.

---

The circular itself is a high-level communication. The detailed technical specifications, definitions, standards, and metrics are contained within the Hong Kong Taxonomy for Sustainable Finance (Phase 2A) document itself, which is accessible via the provided URL: https://brdr.hkma.gov.hk/eng/doc-ldg/docId/20260122-5-EN.

Key technical aspects that would be found in the Taxonomy document (and are relevant to understanding its implications) include:

• Classification System: The Taxonomy is structured around specific economic activities. It defines criteria for these activities to be considered "green" or contributing to "transition."
• Technical Screening Criteria (TSCs): For each eligible economic activity, the Taxonomy will define specific, often quantitative, TSCs. These are the technical thresholds and performance benchmarks that an activity must meet to be classified as sustainable. Examples could include:
• Carbon Emissions Thresholds: e.g., maximum tonnes of CO2 equivalent per kilowatt-hour for energy generation.
• Resource Efficiency Standards: e.g., specific water usage reduction targets.
• Waste Management Metrics: e.g., percentages of waste diverted from landfill.
• Circular Economy Principles: e.g., requirements for recycled content or end-of-life recyclability.
• Do No Significant Harm (DNSH) Principle: A core component of sustainable taxonomies is ensuring that an activity, while contributing to a specific environmental objective, does not significantly harm other environmental objectives. The Taxonomy will outline how this principle is assessed for each activity.
• Alignment with International Standards: The HKMA has likely sought to align its Taxonomy with international best practices and frameworks, such as the EU Taxonomy, to promote comparability and interoperability.
• Specific Environmental Objectives: The Taxonomy typically addresses specific 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
• Transition Activities: The Taxonomy is expected to define criteria for economic activities that are not inherently green but are crucial for the transition to a low-carbon and sustainable economy. This may include activities like investing in carbon capture technologies or upgrading industrial processes to reduce emissions.
• Exclusionary Criteria: The Taxonomy may also specify activities that are explicitly excluded from being classified as sustainable, regardless of any potential benefits, due to significant adverse impacts.
• Methodologies for Measurement and Verification: The Taxonomy document would detail the methodologies for measuring performance against the TSCs and how these should be verified.

Specific Numbers, Percentages, Amounts, Ratios, and Data: These are not provided in the circular itself but are the critical details within the Taxonomy document that AIs will need to work with. For instance, the Taxonomy might specify that a renewable energy project is considered "green" if its lifecycle greenhouse gas emissions are below X grams of CO2e per kWh, or that a manufacturing process is "transitioning" if it demonstrably reduces its carbon intensity by Y% per year. The Consultation Report would summarise feedback on these specific criteria.

Attachments/Appendices:

• Hong Kong Taxonomy: Phase 2A: This is the primary attachment, containing the detailed classification criteria, technical screening criteria, and methodologies. (Link: https://brdr.hkma.gov.hk/eng/doc-ldg/docId/20260122-5-EN)
• Consultation Report: This document summarises the public consultation feedback on the Phase 2A Prototype and provides the HKMA's responses. It is crucial for understanding the rationale behind the final Taxonomy. (Link: https://brdr.hkma.gov.hk/eng/doc-ldg/docId/20260122-3-EN)

This comprehensive summary aims to equip executives with the necessary information to understand the implications of the HKMA's Hong Kong Taxonomy for Sustainable Finance (Phase 2A) and to guide their decision-making regarding its adoption and integration.