The Hong Kong Monetary Authority (HKMA), Hong Kong’s central banking institution, announced the publication of the Hong Kong Taxonomy for Sustainable Finance, aimed at defining and classifying environmentally sustainable economic activities, to help inform decision making and facilitate green finance flows.
According to the HKMA, the sustainable finance taxonomy provides an important tool by enabling a standardized framework for the classification and labelling of financial products based on their environmental sustainability characteristics, allowing investors to identify and invest in activities that generate a positive impact on the environment, and to avoid those with a negative impact, in addition to aligning investments with climate goals while reducing the risk of investing in assets that are not aligned with a low-carbon future, as well as unlocking investment opportunities in green technologies and sustainable projects.
The launch marks the latest in a series of initiatives across jurisdictions to set up a classification system for the definition of sustainable economic activities, including taxonomy systems already established or in development in the EU, UK and Australia.
At launch, the new Hong Kong Taxonomy covers 12 economic activities across 4 sectors, including power generation, transportation, construction, and water and waste management. Going forward, the HKMA said that it aims to expand the taxonomy’s coverage to include more sectors and activities, including adding transition activities. Notably, the Monetary Authority of Singapore (MAS) recently released its own taxonomy, which was the first to introduce a “transition” category.
The publication of the taxonomy follows the launch last year by the HKMA of a prototype green classification framework and discussion paper. According to the HKMA, the feedback received indicated that stakeholders welcomed the classification system, which could help deliver a clearer definition of green products, enhance interoperability, and reduce the risk of greenwashing.
Core principles outlined in the taxonomy’s approach include alignment with the Paris Agreement, offering a proof from greenwashing, offering interoperability with other taxonomies, particularly those from jurisdictions in Mainland China, the EU and the ASEAN, use of science-based criteria and thresholds, and recognition of the importance of the concepts of Do No Significant Harm (DNSH) and Minimum Social Safeguards(MSS).
HKMA Chief Executive Mr Eddie Yue said:
“The release of the Hong Kong Taxonomy for Sustainable Finance marks a key milestone for Hong Kong’s sustainable finance landscape. By providing a common language and framework for sustainable finance, we are equipping market participants with an important tool to make informed decisions, drive impactful cross-border investments, and contribute to global efforts in combating climate change.”
Click here to access the Hong Kong Taxonomy.