On 30 May 2023, the Hong Kong Monetary Authority (HKMA) released a discussion paper titled “Prototype of a Green Classification Framework for Hong Kong” seeking feedback on developing and adopting a green taxonomy for Hong Kong. In an effort to support Hong Kong’s role in linking green financial flows between Mainland China and the rest of the world, HKMA aims to develop a green taxonomy which facilitates interoperability with other major taxonomies such as the Common Ground Taxonomy (CGT), and the taxonomies of Mainland China and the European Union (EU).
Developing the interoperability feature of the proposed Hong Kong taxonomy is key as the CGT is not a single taxonomy and certain of the criteria in the Mainland China and EU taxonomies are only usable within their respective jurisdictions. Accordingly, the challenge has been to formulate a set of economic-activity criteria which match the ambition of those criteria outlined in the CGT and the Mainland China and EU’s taxonomies. The HKMA has commissioned Climate Bonds Initiative to assist in the development of the Hong Kong green taxonomy.
The proposed Hong Kong taxonomy will be developed in phases. The current phase aims to develop the prototype for the Hong Kong taxonomy (Prototype) for four initial sectors, namely, (1) Electricity, Gas, Steam and Air Conditioning Supply; (2) Transportation and Storage; (3) Water supply; sewerage, waste management and remediation activities; and (4) Construction. A total of 12 Prototype activities for these four sectors have been selected as a starting point.
In addition, the Prototype aims to provide three layers of ‘depth’ in providing green definitions of varying extents of precision, taking into account the complexity of the Prototype activities and local circumstances. The three layers are:
- Layer 1: mapping activities to standardised industrial classification codes and classifications;
- Layer 2: identifying key metrics based on existing global guidance and other national or regional taxonomies; and
- Layer 3: proposing technical screening criteria that can be applied to an activity.
For further details regarding the design and structure of the Prototype and proposed next steps in its development, please view the HKMA discussion paper here. The consultation ends on 30 June 2023. Following the consultation, the HKMA plans to summarise the consultation with recommendations on next steps around Q3/2023.