The Hong Kong Monetary Authority (HKMA) announced it will persist in deepening carbon-reduction efforts and enhancing climate resilience to cement the city's status as a leading sustainable finance hub, coinciding with the opening of "Green Week Hong Kong 2026" and the release of Phase 2B of its green classification framework, which now includes an extensive public consultation process.

The central banking institution stated it will continuously update the taxonomy, driven by market evolution, public policy, industry priorities, and the latest technological advancements. This proactive approach aims to amplify the framework's role within Hong Kong's sustainable finance ecosystem, positioning the city as a regional leader in this arena.

Phase 2B expands the taxonomy's scope substantially, integrating a wider array of green and transition activities while refining the assessment framework. These enhancements are designed to address the "Green Week" themes of inclusive transition, climate adaptation, and resilience, offering attendees a concrete foundation for dialogue and discussion.

Accelerating Deep Decarbonization

The second phase revolves around the dual objectives of climate change mitigation and adaptation. In the realm of emission reduction, ten new economic activities have been added across the transportation, manufacturing, and waste treatment sectors, which can be distilled into three key strategic directions.

To drive emission cuts through pivotal technologies, the framework acknowledges that low-carbon transitions require key enabling tech support. Such technologies facilitate the broader adoption of other low-carbon solutions, amplifying overall reduction outcomes. Consequently, Phase 2B introduces activities related to battery manufacturing, battery recycling, and low-carbon technology production. Battery storage systems enable the retention of renewable energy for electricity supply during periods of unstable generation, thereby fostering the expansion of green power. Concurrently, battery recycling promotes resource circularity, supporting the sustainable growth of the electric vehicle market. Moreover, low-carbon technologies encompass the manufacturing of semiconductors, motors, and transformers, with semiconductors serving as core components for energy-efficient systems, smart grids, and renewable installations, accelerating the deployment of innovative decarbonization solutions.

For "hard-to-abate" sectors, the framework provides transition pathways. Certain industries, such as steelmaking, are indispensable to economic operations but face technical constraints that impede rapid emission reductions. To achieve comprehensive decarbonization, it is essential to support the gradual transformation of these sectors, directing capital toward lower-carbon technologies and production processes. Accordingly, Phase 2B establishes technical standards for steel manufacturing, offering two evaluation routes: one based on "emission intensity" that recognizes progressive reduction achievements, and another on "technological improvement" that incentivizes the adoption of advanced abatement techniques. Companies can select the most suitable assessment method based on their circumstances, facilitating decarbonization transitions within a pragmatic and feasible framework.

Supporting green transportation and low-carbon fuels is another pillar of the mitigation strategy. The decarbonization of the transport sector centers on vehicle electrification and the switch to cleaner fuels, both of which are given prominence in the taxonomy. On the electrification front, Phase 2B covers economic activities involving the purchase and use of electric buses, minibuses, and taxis, promoting a reduction in traditional fuel consumption. In the low-carbon fuels arena, the framework encompasses the entire value chain of Sustainable Aviation Fuel, including production, blending, storage, and application, alongside green marine fuels such as the production and use of methanol and ammonia. These technical standards offer clear benchmarks for companies committed to accelerating their transition efforts.

Strengthening Climate Adaptation

While the aforementioned measures target mitigation, climate adaptation is equally critical. In recent years, extreme weather events, including European heatwaves and Asian floods, have repeatedly caused energy disruptions, infrastructure damage, and substantial economic losses. Climate risk has transitioned from a theoretical concern to a tangible financial risk. However, the United Nations Environment Programme estimates that the global adaptation finance gap still amounts to hundreds of billions of dollars. The market requires a clear and reliable assessment methodology to channel capital toward projects that genuinely enhance resilience against disasters.

For adaptation project assessment, Phase 2B introduces a Process-based Approach. This systematic "five-step method" provides explicit guidance on defining project scope, risk identification, measures design and implementation, continuous monitoring, and improvement. Furthermore, adaptation measures are classified into "whitelist" and "non-whitelist" categories to streamline evaluation. Looking ahead, Hong Kong will continue to use "Green Week" to strengthen its influence as a sustainable finance hub. In response to market needs, the HKMA will develop practical application guidelines to assist the industry in effectively utilizing the taxonomy. It will also conduct surveys to gauge the banking sector's implementation, providing a reference for future considerations of integrating the taxonomy into banking regulatory policy.