Second Stage Sustainable Finance Taxonomy
The Hong Kong Monetary Authority (HKMA) expands the scope of the sustainable finance taxonomy, aiming to expand the classification standards for green and transition activities such as transportation, manufacturing, and waste management.
In May 2024, the HKMA released the first phase of the sustainable finance taxonomy, and in February 2026, the HKMA released the second phase of the sustainable finance taxonomy. This update continues to expand the scope of the taxonomy.
Related Post: Hong Kong Monetary Authority Releases Sustainable Finance Taxonomy Phase 2A
Updating and Optimizing Sustainable Finance Taxonomy
This update officially adds the following environmental objectives:
- Biodiversity, nature and ecosystem conservation.
- Sustainable utilization and protection of water resources.
- Pollution prevention and control.
- Resource efficiency and circular economy.
In terms of coverage, the economic activities involved in taxonomy are divided into the following parts:
- Green Activity: Economic activities that comply with net zero emissions and are consistent with 1.5 degrees Celsius economic activities, such as photovoltaics, wind energy, and electric transportation.
- Transition Activity: Activities that have not yet met green standards but can reduce carbon emissions within the timeline.
- Transition measures: Technologies or processes that can replace high emission processes.
Updating Taxonomies for Different Industries
The transportation industry is the second largest carbon emitting industry, accounting for approximately 18% of total emissions. The taxonomy categorizes land transportation and redefines several economic activities for low-carbon transportation infrastructure. In terms of air transportation, the taxonomy has added an evaluation method for sustainable aviation fuel utilization. In terms of ocean transportation, the taxonomy has updated the emission intensity threshold.
The taxonomy divides the manufacturing industry into two evaluation paths, namely the emission intensity threshold path and the net zero emission technology path. In addition, taxonomy also sets a deadline of 2035, by which measures for the transformation of economic activities need to be completed. For climate adaptation activities, taxonomy introduces the Process Based Approach, which means:
- Define the scope of economic activities.
- Assess physical climate risks.
- Develop and implement adaptation plans.
- Monitor implementation and performance.
- Necessary changes in measures.
The Hong Kong Monetary Authority plans to solicit opinions on the expanded sustainable taxonomy and continue to expand into areas such as energy, carbon capture, and green transportation, consolidating Hong Kong’s position as a global green finance center.
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