This document is a Consultation Report on the Prototype of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A), published by the Hong Kong Monetary Authority (HKMA) in January 2026. It details the feedback received from stakeholders on the proposed enhancements to the Taxonomy, which was initially launched in May 2024. The report summarizes the responses, highlights areas of consensus and concern, and outlines the HKMA's approach to refining Phase 2A based on this feedback. The ultimate goal is to create a robust, internationally aligned, and practical sustainable finance framework for Hong Kong.
Hong Kong Taxonomy for Sustainable Finance (Phase 2A) - Consultation Report Summary
Document Overview
This report summarizes the public consultation process and feedback received on the prototype of the Hong Kong Taxonomy for Sustainable Finance (Phase 2A). The Taxonomy, first introduced in May 2024, serves as an enabling tool to guide market participants in making informed decisions about green and sustainable finance, thereby facilitating the scaling up of relevant capital flows. Phase 2A builds upon the initial framework by introducing new green activities, transition elements, and a new environmental objective focused on climate change adaptation. The consultation aimed to gather diverse perspectives from a wide range of stakeholders, including financial institutions, corporates, industry bodies, and NGOs. This report, prepared by the HKMA in collaboration with the Climate Bonds Initiative, presents the key findings, respondent comments, areas of agreement, concerns, and the HKMA's responses and subsequent adjustments to the Phase 2A Taxonomy.
Main Content
The core of the report details the feedback received across four key areas: Taxonomy design and structure, Taxonomy methodology, sector-specific chapters, and Taxonomy implementation.
1. Taxonomy Design and Structure:
- Overall Reception: The Phase 2A prototype was generally well-received and strongly supported by market participants. Respondents found the design, structure, and enhancements to be credible, interoperable, and usable.
- Key Features Appreciated:
- Hierarchical Structure and Activity Cards: The logical organization and user-friendly "activity cards" were praised for aiding navigation.
- Traffic-Light Approach: The classification into "Green Activity," "Transition Activity," and "Exclusion" categories was seen as practical and aligned with regional practices.
- Transition Principles: The inclusion of key transition principles, emphasizing the finite nature of transition and the need for safeguards against carbon lock-in, was well-received.
- Science-Based Methodologies and Time-Bound Criteria: The use of science-based approaches, time-bound criteria, and explicit sunset dates for transition activities was considered essential for rigor and credibility, aligning with Hong Kong's Climate Action Plan 2050.
- Expanded Scope: The inclusion of new sectors like Manufacturing and Information and Communications Technology (ICT) was a significant improvement.
- Climate Change Adaptation: The introduction of a new environmental objective on climate change adaptation, focusing initially on water-related measures, was considered particularly relevant for Hong Kong's resilience.
- Harmonisation and Interoperability: While acknowledged, respondents requested clearer explanations of how alignment with major frameworks (e.g., EU Taxonomy, China's Green Bond Endorsed Project Catalogue, Multi-Jurisdiction Common Ground Taxonomy) is established, suggesting visual mappings.
- Phase 1 Applicability: Clarification was sought on the continued applicability of Phase 1 Taxonomy, with the HKMA confirming that Phase 2A supersedes Phase 1.
- Interface between Taxonomy and Transition Plans: Suggestions were made to develop entity-level criteria to recognize broader decarbonisation initiatives and support general corporate-purpose financing. Respondents also proposed extending transition plan requirements beyond the maritime sector to all sectors. The HKMA clarified that transition plans are required for specific Transition Activities and Transition Measures, with examples provided (e.g., maritime vessels, data centres).
2. Taxonomy Methodology:
- Mitigation Framework - Transition Elements:
- Transition Activities: Defined as economic activities not yet aligned with a 1.5°C pathway but progressing towards it or enabling significant short-term emission reductions by a designated sunset date. These activities can access sustainable financing.
- Transition Measures: Defined as specific components and interventions within an activity that can partially improve emission performance. They facilitate access to sustainable financing for granular processes and technologies, particularly when the entire activity doesn't meet Green or Transition Activity criteria.
- Respondents' Views: The transition elements were well-received, especially in the Asian context, recognizing transition as a credible designation. The distinction between "pure green" and "transition-focused" projects was seen as addressing a market gap and supporting differentiated risk pricing. Transition Measures were seen as particularly valuable for SMEs.
- Sunset Dates: Supported as a time-bound and science-based approach. Suggestions were made to extend certain sunset dates (e.g., to 2040 for aluminium manufacture). The HKMA clarified that sunset dates are determined by factors like technology maturity, emission profiles, market readiness, climate commitments, and international alignment.
- Adaptation Framework:
- Support for Inclusion: Respondents supported the inclusion of climate change adaptation as an objective, with the whitelist approach being a pragmatic starting point.
- Consideration for Project Context: Acknowledged that adaptation measures often form part of larger projects.
- Further Development: Diverse views on expanding the whitelist, incorporating technical criteria, and including maladaptation checks. Suggestions were made to leverage various data sources (e.g., Hong Kong Observatory, international standards, ESG frameworks, insurance risk models). The HKMA stated a whitelist approach was used initially due to the nascent state of adaptation research, with future phases considering more sophisticated approaches.
- Taxonomy Alignment Metrics (CapEx, OpEx, Revenue):
- Clarification Sought: Respondents requested definitions and significance of Capital Expenditure (CapEx), Operational Expenditure (OpEx), and Revenue in claiming Taxonomy alignment.
- HKMA Response: Provided definitions, referencing the Climate Bonds Taxonomy 101 Guide. Taxonomy-aligned CapEx and OpEx are eligible for financing, while Taxonomy-aligned revenue is used for reporting.
- Risk Annotations: A suggestion was made to embed climate risk annotations in activity cards, which the HKMA noted for consideration.
3. Sector Chapters:
Detailed feedback and HKMA responses were provided for specific sectors:
- Energy:
- A-004 Transmission and Distribution of Electricity:
- Emissions Thresholds: Respondents proposed removing thresholds for transmission and distribution networks, arguing they enable net-zero transition rather than being direct emitters.
- Threshold Justification: Requested clarification on the 67% (Green Activity) and 50% (Transition Activity) thresholds for newly connected generation capacity.
- Grid Emissions Factor Calculation: Clarification sought on using historical vs. forward-looking data.
- HKMA Response: Emissions thresholds are necessary safeguards for a whole-system approach, aligning with global taxonomies (EU Taxonomy for 67% Green Activity, Hong Kong Climate Action Plan 2050 for 50% Transition Activity). A five-year historical data approach is used for grid emissions factors, aligning with global practice, with alternative options for anticipated connections.
- A-005 Transmission and Distribution of Renewable and Low-Carbon Gases:
- Definition: Requested a clear definition of "renewable and low-carbon gas."
- Long-Term PPAs: Suggested eligibility for long-term Power Purchase Agreements (PPAs).
- Gas Thresholds: Clarification sought on whether thresholds apply to design capacity or actual throughput.
- HKMA Response: Defined renewable and low-carbon gases (biogas, biomethane, hydrogen and derivatives) and confirmed they can be sourced via long-term PPAs. Thresholds are based on actual throughput.
- A-006 Storage of Electricity:
- Eligibility: Sought confirmation on the eligibility of all battery types and all thermal energy sources, including fossil fuel-based.
- HKMA Response: All battery types are eligible. Electricity storage is primarily for renewable intermittency. Fossil gas-based storage is permitted for firming and backup.
- A-007 District Heating and Cooling:
- Threshold Determination: Requested explanation for threshold determination, especially for Transition Activity.
- Exclusion of Fossil Fuel Heat: Proposed excluding waste heat or cogenerated heat from fossil fuel-based operations.
- HKMA Response: Thresholds reference the EU Taxonomy for Green Activity and are tiered for inclusivity in Transition Activity. Refined activity scope to exclude waste heat/cogenerated heat from fossil fuel operations.
- Fossil Gas Power Generation:
- Inclusion Debate: Mixed feedback on including fossil gas power generation. Some opposed based on IEA Net Zero Roadmap; others supported, recommending alignment with EU Taxonomy criteria.
- Thresholds: Suggestions to reflect Hong Kong's context, consider technology maturity, and adopt alternative thresholds (e.g., TPI, Hong Kong-specific).
- HKMA Response: Acknowledged the transitional role of fossil gas and its consideration for future phases. Current thresholds reference TPI's Below 2°C pathways. Will assess applicability of thresholds for new activities and develop science-based, fit-for-purpose criteria, potentially including localized pathways.
- Transportation:
- B-002 Personal Mobility Devices / B-003 Transport by Motorbikes, Passenger Cars and Light Commercial Vehicles:
- Scope Clarification: Sought clarification on light commercial vehicle scope and overlap with motorbikes.
- HKMA Response: Defined light commercial vehicles (max weight 5.5 tonnes in Hong Kong). Motorbikes are exclusively under B-003.
- Buildings:
- C-002 Construction of New Buildings:
- BEAM Plus Baselines: Requests for flexibility in using BEC baselines and standardizing energy saving thresholds.
- Zero-Carbon-Ready Certification: Clarification on reduction percentages.
- HKMA Response: Current thresholds align with BEAM Plus requirements. Recent updates to BEAM Plus and BEC are under review for future phases. Clarified reduction percentage for Zero-Carbon-Ready Building Certification and BEC baseline for Level 2 improvements.
- C-003 Installation, Maintenance, and Repair of Building Equipment:
- Quantitative Thresholds: Suggested incorporating quantitative thresholds and eligible labeling schemes.
- Lifecycle Approach: Proposed considering embodied carbon, referencing global standards (LEED, BREEAM, IPCC).
- HKMA Response: Taxonomy currently focuses on operational emissions due to data limitations on embodied emissions and materials. Expansion of the Manufacturing sector will address upstream emissions. Qualitative criteria are designed for broad applicability. Added footnote for Hong Kong-specific energy efficiency labels (MEELS, VEELS).
- Waste Sector:
- D-001 & D-003 Sewage Sludge Treatment / Utilisation/treatment of Domestic Waste (Anaerobic Digestion/Co-digestion):
- Quantitative Definition: Requested a quantitative definition for "majority of produced biogas."
- Thresholds: Clarifications sought on bio-waste thresholds and chemical definitions.
- HKMA Response: Intended for all biogas to be utilized; flaring is acceptable only in equipment breakdown cases. Bio-waste should be source-segregated. Food/feed crop feedstock limited to 10%. Chemicals defined broadly.
- Manufacturing Sector:
- E-001 Manufacture of Hydrogen:
- Activity Scope: Clarifications sought on geological hydrogen and derivatives (ammonia, methanol).
- Lifecycle Emissions: Questions on accounting for conversion/reconversion emissions and end-use. Requested LCA template.
- Renewable Electricity Usage: Detailed measurement frequency (hourly, monthly, average annual).
- Forward-Looking Thresholds: Query on de-labelling if future thresholds are not met, and potential for fossil fuel feedstock under Transition Activity.
- HKMA Response: Geological hydrogen excluded for now. Derivatives are separate activities for future consideration. "Cradle-to-site" LCA methodology applied, excluding end-use emissions. Recommended ISO standards for LCA. For additional renewable electricity, monthly is minimum, hourly is best practice, with temporal and geographical correlation required. Considering approaches for forward-looking thresholds. Restricting fossil fuel feedstock under Transition Activity to avoid lock-in.
- E-003 & E-004 Manufacture of Aluminium:
- Calculation Methodology: Requested details on IAI emissions budget and demand projections.
- Hong Kong-Specific Thresholds: Suggested developing local thresholds based on top performers.
- EU Taxonomy Updates: Noted potential alignment issues with EU Taxonomy updates.
- Transition Measure: Suggested including "percentage increase in the utilisation of secondary aluminium or recycled/scrap aluminium."
- HKMA Response: Alumina refining thresholds based on IAI's 1.5°C scenario. Exploring Hong Kong-specific thresholds. Will regularly review forward-looking thresholds considering major frameworks, technology, and local context. Secondary aluminium is considered automatically eligible under Green Activity.
- Information and Communications Technology (ICT) Sector:
- F-001 Data Processing, Hosting and Related Activities:
- BEAM Plus Integration: Suggested explicit incorporation of BEAM Plus standards.
- Water Usage: Highlighted water scarcity and suggested alternatives like recycled water and air cooling.
- GWP of Refrigerants: Considered premature to impose GWP requirements on existing data centres.
- Construction of New Data Centres: Perceived requirements as more stringent than for commercial buildings. Sought clarification on multi-functional data centres.
- HKMA Response: Taxonomy criteria mapped to BEAM Plus. Alternative water efficiency options provided, including recycled water and air cooling. GWP threshold aligned with global standards, encouraging shift to sustainable refrigerants; retrofitting existing data centres falls under Transition Activity. F-001 complements C-002 for data centre operations, while C-002 covers building structure for multi-functional facilities.
- F-002 Data-Driven Solutions for Greenhouse Gas Emissions Reductions:
- Demonstrating GHG Reductions: Sought clarification on how reductions are demonstrated to be on par with best performers.
- Minimum Requirements: Queried minimum energy efficiency and GHG reduction requirements.
- HKMA Response: Criteria are broad and qualitative. Best performers can be identified through market research. No minimum thresholds, but solutions should contribute positively to energy efficiency or GHG reduction.
Key Changes
The Phase 2A prototype and the subsequent feedback have led to several key changes and refinements:
- Introduction of Transition Elements: The formal inclusion of "Transition Activities" and "Transition Measures" to facilitate transition finance.
- New Environmental Objective: Climate Change Adaptation: The addition of adaptation as a key focus area, initially addressing water-related measures.
- Expansion of Sector Coverage: Inclusion of the Manufacturing and ICT sectors.
- Refinement of Mitigation Framework: Clarification on the distinctions and applicability of Transition Activities versus Transition Measures.
- Sunset Dates: Established time-bound criteria for transition activities, calibrated based on various factors.
- Adaptation Framework Approach: Adoption of a whitelist approach for adaptation measures as a starting point, with considerations for future expansion and sophistication.
- Clarification on Taxonomy Alignment Metrics: Detailed definitions and guidance on the application of CapEx, OpEx, and Revenue.
- Sector-Specific Criteria Adjustments:
- Energy: Clarified emissions thresholds for electricity transmission/distribution, defined renewable/low-carbon gas, confirmed eligibility of batteries, and refined district heating/cooling scope.
- Waste: Provided quantitative definition for biogas utilization and clarified bio-waste/chemical definitions.
- Manufacturing: Defined LCA methodology for hydrogen, specified renewable electricity correlation, and noted the exclusion of geological hydrogen.
- ICT: Integrated BEAM Plus standards, provided alternatives for water usage, and clarified refrigerant GWP requirements and data centre assessment scope.
- Supervision of Phase 1: Phase 2A Taxonomy supersedes Phase 1, meaning all future references should align with Phase 2A.
- Interoperability Enhancements: Inclusion of ISIC codes to facilitate cross-referencing with international frameworks.
- Transition Plan Integration: Clarified the role of activity-level and entity-level transition plans.
Important Dates
- May 2024: Publication of Phase 1 of the Hong Kong Taxonomy for Sustainable Finance.
- 8 September 2025: Publication of the prototype of Phase 2A Taxonomy for public consultation.
- January 2026: Publication of this Consultation Report on the Phase 2A prototype.
- Future Dates (Implied): The report indicates ongoing development and future phases, suggesting a continuous evolution of the Taxonomy. Specific effective dates for Phase 2A itself are not explicitly stated in this report, but the consultation process indicates it is in the final stages of development.
Impact Scope
Compliance Requirements
The HKMA emphasizes that the Hong Kong Taxonomy is a voluntary tool at this stage. However, effective implementation guidance is provided:
- Voluntary Adoption: Market participants are encouraged, but not mandated, to adopt the Taxonomy.
- Reporting Requirements: While not explicitly defined as regulatory reporting, the Taxonomy's use in labeling sustainable finance instruments implies reporting on alignment metrics (CapEx, OpEx, Revenue) to investors and stakeholders.
- Implementation Guidance:
- Activity-Level and Asset-Level Assessment: The Taxonomy adopts this approach, aligning with global standards.
- Transition Plan Integration: Specific requirements for activity-level and entity-level transition plans are detailed for certain activities.
- Use Cases: Prioritised use cases include sovereign issuances, sustainable debt issuance, ESG fund products, and innovative financing products. The Taxonomy can also support policy development and corporate strategies.
- Support from Regulatory Agencies: Respondents suggested regulatory support to increase adoption, including potential guidance and frameworks.
- Specific Guidance within Sectors: Each sector chapter outlines specific criteria, thresholds, and definitions that entities must meet to claim alignment for relevant activities.
Technical Details
- Classification Framework:
- Green Activity: Economic activities that meet stringent environmental criteria and substantially contribute to environmental objectives without causing significant harm.
- Transition Activity: Economic activities that are not yet aligned with a 1.5°C pathway but are progressing towards alignment or enable significant short-term emissions reductions by a designated sunset date.
- Transition Measure: Specific components/interventions within an activity that partially improve emission performance.
- Exclusion: Activities deemed to have a significant negative environmental impact.
- Environmental Objectives:
- Climate Change Mitigation: Covered in Phase 1 and expanded in Phase 2A.
- Climate Change Adaptation: New objective introduced in Phase 2A, initially focusing on water-related measures.
- Key Metrics and Standards:
- Power Usage Effectiveness (PUE): Relevant for data centres (ICT sector).
- Water Usage Effectiveness (WUE): Relevant for data centres (ICT sector).
- Global Warming Potential (GWP): For refrigerants used in data centres.
- Emissions Thresholds: Specific quantitative thresholds (e.g., gCO2e/kWh) are set for various activities, often referencing international standards like the EU Taxonomy or the IEA Net Zero Pathway. Examples include 67% for Green Activity and 50% for Transition Activity in electricity transmission/distribution related to generation capacity.
- ISIC Codes: International Standard Industrial Classification of All Economic Activities codes are used for classification.
- BEAM Plus: A building certification standard referenced for building-related activities.
- BEC (Building Energy Code): Baselines used in conjunction with BEAM Plus.
- IAI (International Aluminium Institute): Emissions budget used for aluminium manufacture.
- TPI (Transition Pathway Initiative): Used for assessing fossil gas power generation thresholds.
- CapEx (Capital Expenditure), OpEx (Operational Expenditure), Revenue: Financial metrics for Taxonomy alignment assessment and reporting.
- Methodologies:
- Science-Based Methodologies: Employed throughout the Taxonomy.
- Lifecycle Assessment (LCA): "Cradle-to-site" methodology applied for hydrogen manufacture, excluding end-use emissions.
- Whitelist Approach: Used for adaptation measures as an initial step.
- Sunset Dates: Time-bound criteria for transition activities, e.g., a 2040 sunset date for aluminium manufacture.
- Interoperability: Explicit referencing and mapping to major international taxonomies (EU Taxonomy, China's Green Bond Endorsed Project Catalogue, Multi-Jurisdiction Common Ground Taxonomy) are emphasized.
Attachments, Tables, and Appendices
- Table 1: Consultation Questions of Phase 2A Taxonomy Prototype: Outlines the specific questions posed to stakeholders covering Taxonomy design, structure, scope, methodology, sector chapters, and implementation.
- Figure 1: Type of respondents to Phase 2A taxonomy prototype: A pie chart and table detailing the breakdown of the 25 respondents by category (Banks, Asset managers, Insurance companies, Corporates, Industry and professional associations, Non-government organisations).
- Chapter IV: Looking Forward (Referenced): While not fully included in the provided text, this chapter is referenced multiple times, indicating it contains further details on proposed areas for future development and expansion of the Taxonomy, including new activities, environmental objectives, and regions.
This summary aims to provide executives with a comprehensive understanding of the HKMA's Consultation Report on the Phase 2A Hong Kong Taxonomy for Sustainable Finance, enabling informed decision-making regarding its adoption and integration into business strategies.