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Hong Kong taxonomy draft moves beyond green-only sectors

The draft adds transition pathways for air transport and iron and steel, growing the framework from 25 to 39 activities.

At a glance

  1. The draft's new green and transition activities span transportation, manufacturing, and waste, bringing transition pathways for air transport and iron and steel, two of the harder sectors to decarbonize, alongside enabling-technology categories covering the manufacture and recycling of batteries and the manufacture of low-carbon technologies.
  2. The bigger change sits on the adaptation side, where the draft expands climate-adaptation measures and introduces a process-based approach to classifying them, designed to ensure each measure makes a substantial contribution and manages maladaptation risk; the HKMA cites the location- and context-specific nature of adaptation, with shoreline protection and flood management as the initial focus.
  3. The May 2024 launch already pointed toward expansion: the original framework gave investors a shared screen for identifying environmentally positive activities and avoiding negative ones, reducing the risk of holding assets misaligned with a low-carbon future, and the HKMA said then that it would build in phases, adding sectors and transition categories over time.

Hong Kong's sustainable finance taxonomy is picking up its first transition lane. The Hong Kong Monetary Authority announced draft 'Phase 2A' of the Hong Kong Taxonomy on September 8, ESG Today reported, an update that carries the classification system beyond the green-only categories of its initial version, published in May 2024, and into transportation, manufacturing, and waste.

The draft's new green and transition activities span transportation, manufacturing, and waste, bringing transition pathways for air transport and iron and steel, two of the harder sectors to decarbonize, alongside enabling-technology categories covering the manufacture and recycling of batteries and the manufacture of low-carbon technologies. Those enabling categories matter less for what they emit themselves than for what they allow other industries to avoid; with 10 new activities and some recategorization, the framework grows from 25 to 39 economic activities.

The bigger change sits on the adaptation side, where the draft expands climate-adaptation measures and introduces a process-based approach to classifying them, designed to ensure each measure makes a substantial contribution and manages maladaptation risk; the HKMA cites the location- and context-specific nature of adaptation, with shoreline protection and flood management as the initial focus.

The May 2024 launch already pointed toward expansion: the original framework gave investors a shared screen for identifying environmentally positive activities and avoiding negative ones, reducing the risk of holding assets misaligned with a low-carbon future, and the HKMA said then that it would build in phases, adding sectors and transition categories over time.

Taxonomies are paper; underwriting is where they live or die. As this publication has argued, transition finance becomes an asset class when its terms are measurable rather than slogans, and this draft puts measurable terms on the page for steel, aviation, and battery recycling. The test now is whether those definitions travel intact from the taxonomy's pages to the credit committees pricing the actual projects.

Reported by the Policy & Disclosure desk from ESG Today. Published . Corrections

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