The Hong Kong Monetary Authority (HKMA) has released a draft “Phase 2A” update to the Hong Kong Taxonomy, proposing to broaden its sustainable finance and investment classification framework. The update introduces new categories for climate change mitigation and adaptation, along with additional transition activities aimed at supporting the decarbonisation of hard-to-abate sectors. 

The proposal builds on the HKMA’s initial Taxonomy, published in May 2024, which was developed to help investors identify environmentally sustainable economic activities, align investments with climate objectives, and reduce exposure to assets that may not be compatible with a low-carbon economy. The HKMA has adopted a phased approach, with plans to gradually expand the sectors and activities covered and incorporate transition-related categories. 

The latest draft proposes new green and transition activities across the transportation, manufacturing, and waste sectors. It also strengthens the taxonomy’s transition focus by introducing transition pathways for hard-to-abate industries, including aviation and iron and steel. 

The proposed framework also recognises enabling technologies that can support wider decarbonisation efforts, including battery manufacturing and recycling and the production of low-carbon technologies. 

With the addition of 10 new activities and the recategorisation of certain existing activities, the draft would increase the number of economic activities covered by the taxonomy from 25 to 39. 

The draft further strengthens the taxonomy’s focus on climate adaptation by introducing a process-based approach to assess adaptation activities. This approach is intended to ensure that activities make a substantial contribution to climate adaptation while managing the risks of maladaptation. The initial focus is on shoreline protection and flood management, reflecting key climate risks faced by Hong Kong. 

Beyond climate mitigation and adaptation, the proposed framework also identifies four additional environmental objectives: 

• Biodiversity, nature and ecosystem protection  

• Sustainable use and conservation of water resources  

• Pollution prevention and control  

• Resource efficiency and circular economy  

The HKMA indicated that future phases will progressively incorporate these objectives, taking into account market developments, government policies, industry priorities, and technological advancements. 

With the release of the draft, the HKMA has also launched a public consultation on the Phase 2A proposals, which will remain open until 7 October 2026.