The Hong Kong Monetary Authority (HKMA) has introduced the Hong Kong Taxonomy for Sustainable Finance, aimed at categorizing and defining environmentally sustainable economic activities. This taxonomy serves as a standardized framework for classifying financial products based on their environmental impact, empowering investors to make informed decisions that align with climate goals and promote green finance flows.
By providing a clear classification system, the taxonomy enables investors to identify opportunities for positive environmental impact while avoiding investments that may harm the environment. It also aims to reduce the risk of investing in assets not aligned with a low-carbon future, thereby unlocking investment opportunities in green technologies and sustainable projects.
The launch of the Hong Kong Taxonomy follows similar initiatives in other jurisdictions, such as the EU, UK, and Australia, which have established or are developing their own classification systems for sustainable economic activities.
“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.”
HKMA Chief Executive, Mr Eddie Yue
Initially, the Hong Kong Taxonomy covers 12 economic activities across 4 sectors, with plans to expand its coverage to include more sectors and activities, including transition activities. The taxonomy’s principles include alignment with the Paris Agreement, proof against greenwashing, interoperability with other taxonomies, use of science-based criteria, and recognition of concepts such as Do No Significant Harm (DNSH) and Minimum Social Safeguards (MSS).
This initiative builds upon the HKMA’s prototype green classification framework and discussion paper launched last year, with stakeholders welcoming the system for its potential to provide clarity on green products and reduce the risk of greenwashing.
Overall, the Hong Kong Taxonomy for Sustainable Finance represents a significant step towards promoting green finance and sustainable investment practices in Hong Kong and beyond.
