HKMA Introduces Hong Kong Taxonomy for Sustainable Finance

The Hong Kong Monetary Authority (HKMA) has unveiled the Hong Kong Taxonomy for Sustainable Finance, a framework designed to classify environmentally sustainable economic activities and guide investment decisions. This initiative aims to provide investors with clarity on green finance, facilitating the flow of funds into sustainable projects while aligning with global climate goals.

The taxonomy establishes a standardised system for categorising financial products based on their environmental sustainability. It allows investors to identify and focus on opportunities that contribute positively to the environment while avoiding those that might have adverse impacts. By reducing the risk of investing in assets that are not aligned with a low-carbon future, the taxonomy helps to combat greenwashing and promotes a clearer understanding of sustainable investments.

Initially, the taxonomy covers 12 economic activities across four key sectors: power generation, transportation, construction, and water and waste management. The HKMA plans to expand the taxonomy’s scope to include additional sectors and transition activities in the future. This effort follows similar initiatives in other jurisdictions, such as the European Union, the United Kingdom, and Australia, which have already established or are developing taxonomy systems to support sustainable finance.

Feedback from stakeholders regarding the prototype green classification framework and a discussion paper released by the HKMA last year has been positive. Stakeholders appreciated the potential for clearer definitions of green products, enhanced interoperability, and reduced risks of greenwashing.

HKMA Chief Executive Eddie Yue highlighted the importance of the new taxonomy, stating, “The release of the Hong Kong Taxonomy for Sustainable Finance marks a key milestone for Hong Kong’s sustainable finance landscape.” He also emphasised its role in equipping market participants with a common language and framework for informed decision-making, driving cross-border investments, and contributing to global climate change mitigation efforts.

“With the new taxonomy, Hong Kong’s financial sector gains a crucial tool to make informed decisions and contribute to impactful investments,” Yue added.

The HKMA’s move to establish a robust framework for sustainable finance reinforces Hong Kong’s commitment to supporting environmentally responsible investment and aligns with broader global efforts to combat climate change. As the taxonomy evolves, it is expected to play a key role in promoting sustainable economic activities and fostering a greener future.