• Phase 2B expands the taxonomy from 25 to 39 economic activities, adding criteria for green and transition finance.
• Batteries, low-carbon technologies, aviation, steel and climate adaptation gain clearer pathways for capital allocation.
• The consultation runs until 7 October 2026, giving financial institutions and other stakeholders one month to respond.

HKMA opens consultation on expanded framework

The Hong Kong Monetary Authority has opened a public consultation on the Phase 2B prototype of the Hong Kong Taxonomy for Sustainable Finance.

The proposal expands the framework’s economic coverage and sharpens its treatment of transition finance. It also introduces a new methodology for assessing climate adaptation activities.

Public comments are due by 7 October 2026.

The taxonomy is designed to help banks, investors and companies identify activities that qualify as green or sustainable. Clear definitions can improve capital allocation, support financial product development and reduce the risk of greenwashing.

For corporate leaders, Phase 2B could influence which projects attract sustainability-linked financing in Hong Kong. It may also shape the evidence lenders and investors expect when assessing transition plans.

Coverage expands to 39 activities

The HKMA has added 10 economic activities to the prototype. It has also recategorised some activities included in Phase 2A, which was published earlier in 2026.

These changes lift the total number of covered activities from 25 to 39. Technical criteria for green and transition activities are included where applicable.

The authority developed the latest phase using market feedback, government policies and industry requirements. Developments in technology and climate science also informed the revisions.

The broader coverage reflects the financing needs of Asia’s transition. Many regional economies remain dependent on carbon-intensive infrastructure, while their industries face rising pressure to cut emissions without disrupting economic growth.

Hong Kong’s role as an international financial centre gives its taxonomy relevance beyond the domestic market. Financial institutions operating across Asia may use the framework to classify assets, structure products and evaluate borrowers.

Batteries, aviation and steel enter focus

Phase 2B adds enabling technologies that support wider decarbonisation. These include battery manufacturing and recycling, as well as the production of low-carbon technologies.

The inclusion of these activities could help direct capital toward supply chains needed for electrification and clean-energy deployment. It also gives financiers a clearer basis for assessing whether projects meet environmental criteria.

Hard-to-abate sectors receive greater attention. The prototype provides transition pathways for air transport and iron and steel, where immediate alignment with a fully green threshold may not be commercially or technologically feasible.

That distinction matters for investors. A taxonomy that covers only activities already considered green can exclude sectors responsible for a large share of emissions. Transition criteria can instead support progressive decarbonisation, provided safeguards are credible and performance can be verified.

The governance challenge will be maintaining environmental integrity while accommodating practical transition constraints. Weak thresholds could encourage greenwashing. Criteria that are too restrictive could prevent capital from reaching projects capable of delivering material emissions reductions.

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Adaptation framework targets physical risks

The proposal also introduces a process-based approach to climate adaptation. Unlike many mitigation activities, adaptation measures depend heavily on local geography, exposure and environmental conditions.

The methodology provides a systematic framework for determining whether an activity makes a substantial contribution to adaptation. It also addresses maladaptation, where an intervention reduces one risk while creating or worsening another.

Phase 2B contains 24 adaptation measures developed with reference to Hong Kong government guidance. These comprise 11 pre-approved measures and 13 measures requiring further assessment.

The initial focus is shoreline protection and flood management. Both are closely connected to Hong Kong’s exposure to coastal hazards and extreme rainfall.

For banks and asset owners, the adaptation criteria could improve scrutiny of resilience investments. Companies may need stronger location-specific risk assessments and clearer evidence that proposed measures deliver durable benefits.

Regional influence will depend on implementation

The consultation gives market participants an opportunity to test whether the criteria are usable across lending, investment and disclosure processes. Feedback will be especially important for multinational institutions that must navigate several sustainable finance classification systems.

Alignment and interoperability will affect the taxonomy’s international reach. Businesses operating across jurisdictions face higher compliance costs when definitions or reporting requirements diverge.

Phase 2B positions Hong Kong to channel more capital into both decarbonisation and physical climate resilience. Its wider significance will depend on the final thresholds, the quality of corporate data and consistent application by financial institutions across regional markets.