Hong Kong may mandate green taxonomy for banks to enhance sustainable finance
The Hong Kong Monetary Authority, the country’s central banking institution, is planning to make its green taxonomy framework mandatory for the banking sector to support the development of sustainable financing in the city.
Hong Kong’s de facto central bank introduced the green taxonomy in May to assist banks and investors in evaluating the sustainability of economic activities. This taxonomy encompasses 12 economic activities across four sectors:
- Energy,
- Transport,
- Construction, and
- Water and waste management.
Keneth Hui, executive director of HKMA, said, “We will look into whether to make it mandatory, at least for the banking sector, so that we have a solid investor base.”
He added, “Right now, it’s voluntary, so capital market and banking participants can choose to adopt it. We believe it provides a good reference point for investors as well as issuers to basically have a clear definition of what is green and what isn’t.”
The green taxonomy, as a comprehensive framework, is designed to define and categorize environmentally sustainable investments. It plays a key role in addressing economic activities and assets that are ‘green’, thereby preventing greenwashing and promoting sustainable finance.
Read more: Calls mount for accelerated action on sustainable finance taxonomy in Canada
HKMA is also working on broadening the taxonomy’s coverage to include other green activities, such as hydrogen and hydropower.
Additionally, the monetary authority plans to include transition financing in the taxonomy and explores the possibility of guiding the industry.
“By providing a common language and framework for sustainable finance, we are equipping market participants with an important tool to make informed decisions, drive impactful cross-border investments, and contribute to global efforts in combating climate change, ” Eddie Yue, chief executive of HKMA, said in May.
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