In January this year, we published Phase 2A of the Hong Kong Taxonomy for Sustainable Finance (Taxonomy). Today, with the opening of Hong Kong Green Week 2026, we are releasing the Phase 2B prototype of the Taxonomy for public consultation. This new phase further expands the coverage to incorporate additional green and transition activities, and refines the assessment framework. It echoes the focuses of this year’s Green Week on inclusive transition as well as climate adaptation and resilience, providing participants with a concrete basis for discussion.
Before introducing Phase 2B, let me reiterate that our ongoing development and enhancement of the Taxonomy aims to establish a clear and credible assessment tool for the market. By clearly defining economic activities that contribute to green and sustainable development, the Taxonomy supports informed decision-making and helps scale up relevant capital flows.
As the Taxonomy continues to be enhanced, a growing number of banks and corporates have adopted it in their investment and financing activities and sustainable finance frameworks, strengthening investors’ confidence in the “greenness” of projects. For example, financing for Hong Kong’s first public hydrogen refuelling station was raised through a green loan certified as aligned with the Taxonomy. A number of Taxonomy-aligned bonds and loans have also been launched in the market in sectors such as transportation and energy, reflecting the Taxonomy’s increasingly widespread adoption.
Deepening decarbonisation impact
Phase 2B continues to focus on the two objectives of climate change mitigation and climate change adaptation. On the mitigation side, 10 new economic activities have been added across the transportation, manufacturing, and waste management sectors. The key focus areas can be summarised in three directions:
- Supporting key technologies that drive emissions reduction
Advancing the low-carbon transition requires the support of key enabling technologies. These technologies facilitate the wider adoption of other low-carbon solutions, thereby driving broader emissions-reduction outcomes. Phase 2B therefore introduces activities such as battery manufacturing, battery recycling, and the manufacture of low-carbon technologies. Battery energy storage supports the wider uptake of green electricity by storing renewable energy and supply power when generation is intermittent. Battery recycling supports the circular use of resources and complements the sustainable growth of the electric vehicle market. Furthermore, low-carbon technologies cover the manufacture of semiconductors, motors, and transformers. Semiconductors, in particular, are core components of energy-efficient systems, smart grids, and renewable energy installations, helping innovative decarbonisation technologies reach the market more quickly.
- Providing transition pathways for “hard-to-abate sectors”
While certain sectors such as the iron and steel industry are essential to the economy, it is difficult for them to achieve significant emissions reduction in the short run due to technological limitations. These industries are generally referred to as “hard-to-abate sectors”. To achieve economy-wide decarbonisation, it is crucial to support these sectors in their progressive transition and direct capital towards lower-carbon technologies and production methods.
The technical criteria for manufacturing of iron and steel in Phase 2B have been developed with this approach in mind. We have set out two assessment pathways: one based on “emissions intensity”, which recognises progressive emissions reduction; and another based on “technological improvement”, which encourages the adoption of advanced emissions-reduction technologies. Companies can choose the pathway best suited to their circumstances and pursue their transition under a pragmatic and feasible framework.
- Supporting the development of green transportation and low-carbon fuels
Decarbonising the transport sector centres on vehicle electrification and the shift to lower-carbon fuels. The Taxonomy therefore gives equal emphasis to both. On electrification, Phase 2B covers the purchase and use of electric buses, electric minibuses, and electric taxis, supporting a reduction in the use of conventional fuels. On low-carbon fuels, Phase 2B covers the entire value chain of sustainable aviation fuel (SAF) – including its production, blending, storage, and use – as well as the production and use of green marine fuels such as methanol and ammonia. The relevant technical criteria provide clear reference points for companies committed to accelerating their transition.
Enhancing climate resilience
While the measures above address climate mitigation, adaptation to climate change is equally important. In recent years, extreme weather events such as heatwaves in Europe and flooding in Asia have become more frequent, causing energy disruptions, infrastructure damage, and significant economic losses. Climate risks have become tangible financial risks. However, the United Nations Environment Programme estimates that the global adaptation finance gap amounts to hundreds of billions of US dollars. The market needs a clear and reliable assessment methodology to channel capital into projects that can genuinely enhance resilience.
Introducing a five-step assessment for adaptation projects
Unlike climate mitigation, climate adaptation must account for location-specific factors. Even when the same climate risk is faced, the appropriate response may vary significantly across different locations. For example, coastal areas facing flooding risk may need stronger shoreline protection, while densely built-up urban areas may require improved drainage systems. If not designed properly, adaptation measures can even produce counterproductive outcomes — known as maladaptation. For example, a seawall that protects one area but increases flooding risk for neighbouring communities by altering water-flow patterns.
Phase 2B therefore introduces a process-based approach (PBA). Simply put, it is a systematic five-step assessment that provides clear guidance on (1) defining the project scope; (2) identifying climate risks; (3) designing and implementing adaptation measures; (4) ongoing monitoring; and (5) enhancing the measures. The PBA provides flexibility to accommodate different circumstances while maintaining rigorous and consistent assessment principles. It also supports practical market application. Where project proponents have already updated design standards or undertaken other relevant work in response to climate change, certain assessment steps may, depending on the circumstances, be streamlined or omitted to avoid duplication.
Two categories of adaptation measures
Adaptation measures under Phase 2B fall into two broad categories — “whitelist” and “non-whitelist”:
(a) Whitelist measures
Whitelist measures have been rigorously assessed and confirmed to make a substantial contribution to climate adaptation with low maladaptation risk. Backed by an established evidence base, these measures may be adopted directly by market participants and are deemed to meet Taxonomy requirements without further assessment.
Phase 2B adds 11 whitelist measures, expanding coverage to the energy, transportation, buildings, information and communications technology, and risk management and response sectors. Drawing on the HKSAR Government’s research on coastal and flood management, the Taxonomy includes measures such as flood monitoring devices and early warning systems that address Hong Kong’s key climate risks, thereby responding to local needs.
(b) Non-whitelist measures
Not all adaptation measures can be evaluated against a single set of criteria. For some, effectiveness can only be determined through case-specific assessment and careful management of maladaptation risks. These are categorised as “non-whitelist” measures. Project proponents must follow the PBA and apply appropriate technical metrics in their assessments. For example, for drainage improvement projects, proponents should specify quantifiable parameters, such as design flow and drainage capacity, to demonstrate that the measures can effectively address relevant climate risks without transferring those risks elsewhere.
We have focused initially on two areas closely related to Hong Kong’s major climate risks, namely shoreline protection and flood management. With reference to HKSAR Government guidelines1, the Taxonomy provides a reference list of 13 non-whitelist measures together with examples of technical metrics for assessment.
Looking ahead: building capacity and leveraging Green Week to promote market adoption
We are now conducting a public consultation on the Phase 2B prototype and invite stakeholders across different sectors to actively participate and contribute to the refinement of the final version. Leveraging the platform of the third Hong Kong Green Week, we also look forward to in-depth discussions on how the Taxonomy can be used effectively to accelerate Asia’s transition and strengthen climate resilience.
In just three years, Hong Kong Green Week has become a major annual gathering for Asia’s sustainable development community. Against an increasingly complex and volatile global backdrop, it provides a platform for policymakers, business leaders, experts and academics to exchange views and foster collaboration. The 2026 edition has brought together more than 100 local and international public- and private-sector organisations to host around 60 events. It is particularly encouraging to see broader participation by stakeholders from the real economy, as well as those from overseas and the Chinese Mainland. The discussions have also moved beyond concepts towards practice, exploring climate policy and sustainable finance through the lenses of energy security and economic resilience.
Looking ahead, we will continue to leverage Green Week to consolidate and elevate Hong Kong’s position and influence as a sustainable finance hub. In response to market needs, we will develop practical guidance to support the industry’s effective adoption of the Taxonomy. We will also use surveys and other channels to better understand how the banking sector is adopting the Taxonomy. This will inform future consideration of whether the Taxonomy should be incorporated into our banking supervisory policy.
The HKMA will continue to update the Taxonomy, guided by market developments, public policies, industry priorities, and the latest technological advancements. We will maintain ongoing dialogue with market participants and stakeholders, promoting the Taxonomy to play a greater role in Hong Kong’s sustainable finance ecosystem and further consolidating Hong Kong’s position as a sustainable finance hub in the region.
Arthur Yuen
Deputy Chief Executive
Hong Kong Monetary Authority
7 September 2026
1 Including referencing the Shoreline Management Guideline for Coastal Development published by the Civil Engineering and Development Department and Drainage Services Department Practice Note No. 2/2023 - Guidelines on Flood Resilience published by the Drainage Services Department.
