The Hong Kong Monetary Authority (HKMA) has published a circular in which it informs that it has launched a discussion paper entitled Prototype of a Green Classification Framework for Hong Kong.
The purpose of this paper is to present a first framework of a Hong Kong taxonomy that takes into account the Common Ground Taxonomy (CGT) developed by the International Platform on Sustainable Finance (IPSF), as well as the taxonomies implemented by Mainland China and the European Union in an effort to enhance sustainability-related disclosures of firms and to facilitate simple navigation across all major taxonomies.
The first framework was developed by an external consultant, the Climate Bonds Initiative, on behalf of the Green and Sustainable Finance Cross-Agency Steering Group (CASG) (which the HKMA is part of) which has been actively exploring the creation of a Hong Kong taxonomy over the past year.
To conclude, the HKMA notes that it strongly appreciates any feedback on the first framework by June 30, 2023.
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##### The following presents a brief summary of the discussion paper
As noted above, the discussion paper presents a first framework of the proposed Hong Kong taxonomy. It outlines some of the key benefits of adopting an own taxonomy (e.g. promoting the achievement of the Paris climate goals, standardizing sustainability-related information of issuers, facilitating the comparison of financial products by investors) and presents the key reference taxonomies that have been taken into account.
Furthermore, the paper sets out the key objectives of the Hong Kong taxonomy, including the achievement of the beforementioned climate goals, the prevention of greenwashing, the interoperability with other taxonomies, and the introduction of science-based criteria and thresholds for greenhouse gas emissions and other effects on the environment.
The paper then goes on to present the different taxonomy layers, the CASG would implement. The graphic below depicts the proposed layers:
(1) Layer 1 of the framework categorizes industrial activities along the standardized industrial classification codes as to their potential for being considered green (potentially green or green).
(2) Layer 2 would establish the appropriate metrics for evaluating the greenness of activities in Hong Kong, considering both their global applicability and their relevance to the local financial landscape. These metrics could become essential parts of annual or investor reports.
(3) Layer 3 would set out the technical screening criteria to be applied by firms for the classification of their activities as „green“.
Graphic 1: Taxonomy layers
And finally, the paper presents the so-called „sectoral activity cards“ that would be introduced and indicate information as to the above noted activity classification, the comparable classification under other taxonomies, and the eligibility to be considered green.