Hong Kong Taxonomy Phase 2B: 39 Activities and the DNSH Framework in Development

The Hong Kong Monetary Authority opened a public consultation on the Phase 2B prototype of the Hong Kong Taxonomy for Sustainable Finance on 7 September 2026, and the window closes on 7 October 2026. Interested parties may submit comments by 7 October 2026. Firms that use the Taxonomy for products or classifications may therefore wish to review the prototype before that date. The Hong Kong Taxonomy Phase 2B consultation is short, and the changes underneath it are structural.

Two headline numbers frame the update. The count of climate change mitigation activities rises from 25 to 39, and the taxonomy’s list of environmental objectives grows from two to six. The consultation paper defines six environmental objectives as the backbone for DNSH assessment and introduces a process-based methodology for climate change adaptation; it also states that DNSH is not yet fully considered under Phase 2B and that detailed DNSH criteria are for future iterations. None of this creates a filing obligation. The Hong Kong Taxonomy is a voluntary classification framework, described by the HKMA as a market-enabling tool, and its job is to give banks, lenders and fund managers a common definition of what counts as green or transition when they build products and make claims about them.

That voluntary status is exactly why the detail matters. Phase 2B is still a consultation prototype. Firms can assess how the proposal would affect future classifications, but should not treat it as the current Taxonomy; for the reclassified land-transport activities, the prototype states that existing Phase 2A alignments remain unaffected.

Related reading: Hong Kong Taxonomy Phase 2A: Transition and Adaptation

Key dates for the Phase 2B consultation

The calendar here is compressed. The Hong Kong Taxonomy Phase 1 was published in May 2024, covering 12 green activities across four sectors. The HKMA opened the Phase 2A prototype consultation in September 2025, refined the framework against the feedback received, and published the finalised Phase 2A on 22 January 2026, broadening scope to 25 activities and adding climate change adaptation as an objective. The current Phase 2B cycle runs from 7 September 2026, when the HKMA launched the prototype consultation, to 7 October 2026, when written comments are due.

The pattern from Phase 2A is the useful signal for planning. The HKMA consulted on the Phase 2A prototype in September 2025, refined it against the feedback, and published the final version in January 2026. Phase 2B is now at the same prototype-and-consultation stage. The HKMA has not fixed a publication date for the final Phase 2B, so treat any finalisation timeline as an expectation drawn from the Phase 2A sequence.

What the Hong Kong Taxonomy Phase 2B prototype actually is

The first thing to get right is the legal weight of the document, because the trap with any taxonomy is to read it as a reporting regime. For climate-change-mitigation activities, the Hong Kong Taxonomy uses Green, Transition and Exclusion categories, with the applicable criteria determining the classification. It does not require an authorised institution to map its loan book to those criteria, and it does not generate a return that goes to a supervisor on a fixed cycle. The HKMA develops it in phases precisely so the market can adopt it where it adds value, in product design, in framework alignment, and in investment decisions.

The contrast with the European regime is the cleanest way to see the point. Under EU Taxonomy Article 8, non-financial undertakings in scope disclose turnover, CapEx and OpEx KPIs, while financial undertakings are subject to separate Article 8 KPIs, such as the green asset ratio for credit institutions. That is a mandatory disclosure with a legal basis. The Hong Kong Taxonomy carries no equivalent statutory disclosure requirement. Both are classification systems, but only one comes with a reporting duty attached, and conflating the two is the single most common error when a firm imports its European playbook into a Hong Kong context. Our note on EU Taxonomy Article 8 KPI disclosure sets out how that mandatory side works.

What Phase 2B does is refine the vocabulary that voluntary uses depend on. Banks and corporates already use the taxonomy to support product development, inform investment decisions, and align their sustainable finance frameworks with a recognised definition of green. A cleaner, broader classification makes those labels more defensible. That is the practical value, and it is also why a moving target during consultation is worth engaging with while the criteria are still open.

From 25 to 39: reading the mitigation expansion correctly

Phase 2B adds 10 new economic activities for climate change mitigation, with technical criteria for green and transition activities and measures where applicable. According to the consultation paper, those additions sit across the Transportation, Manufacturing and Waste sectors, and they reflect the roles of the circular economy, industrial decarbonisation, clean transportation and low-carbon technologies in the transition. The examples the HKMA highlights include the manufacture and recycling of batteries, the manufacture of low-carbon technologies, air transport, and iron and steel.

The HKMA also re-categorised some Phase 2A activities alongside the 10 new ones, bringing the total to 39, a figure that simple addition of 25 plus 10 would not produce. The consultation paper flags several activities as reclassified in Phase 2B and others, published earlier, as updated. So a firm that treats the update as a bolt-on of 10 fresh rows will miscount, and more importantly will miss that an activity it already relies on may have shifted category or had its criteria tightened. The correct step is a line-by-line reconciliation of the Phase 2B activity list against whatever the firm mapped under Phase 2A, not a delta of headline totals.

The distribution of the additions carries a message about intent. By concentrating on Manufacturing and hard-to-abate transport, Phase 2B is pushing the taxonomy toward the parts of the economy that are hardest to decarbonise and most dependent on transition finance, the segment a pure green label was never built to cover. That is a deliberate design choice, and it changes which corporate customers a lender can credibly bring inside the framework.

Four new environmental objectives and the DNSH framework in development

The change that the press release understates, and the one most likely to reshape how activities qualify, is in the consultation paper’s introduction. Phase 2A prioritised two environmental objectives, climate change mitigation and climate change adaptation. Phase 2B defines four new objectives, establishing a full scope of six: climate change mitigation; climate change adaptation; biodiversity, nature and ecosystem protection; sustainable use and conservation of water resources; pollution prevention and control; and resource efficiency and circular economy.

These six objectives provide the conceptual backbone for DNSH assessment. However, the prototype expressly states that DNSH is not yet fully considered under Phase 2B and that detailed DNSH criteria across the relevant environmental objectives are for future iterations. In the interim, the adaptation process-based approach includes generic DNSH principles relating to climate change mitigation; it does not impose a fully operational cross-objective DNSH test on mitigation activities.

One caution keeps this accurate. Defining the four new objectives is not the same as fully operationalising activity-level criteria for each of them. The consultation paper frames the six objectives as setting the scope of the taxonomy and providing the backbone of the DNSH assessment, with mitigation and adaptation carrying the detailed activity criteria at this stage. A firm should read the four new objectives as the harm-test reference points and the direction of travel, and should watch the consultation questions for how far the operational detail extends. This is the area where an over-reading of the prototype would produce a compliance claim the text does not yet support. The biodiversity dimension in particular echoes the direction supervisors elsewhere are taking, as our summary of the ECB’s good practices on nature-related risk describes.

Green, transition, and the pathways for hard-to-abate sectors

The Hong Kong Taxonomy separates green activities from transition activities, and Phase 2B leans hard into the transition category. The distinction is not a soft one. The HKMA sets out four principles that govern what can sit in the transition bucket at all. Transition applies only to activities with limited or no low-carbon alternatives, so a fossil-fuelled passenger vehicle does not qualify because electric alternatives exist and should be prioritised. Transition requires demonstrable progress against feasible, forward-looking thresholds. Transition is time-bound, with a sunset date by which an activity must either meet the green criteria or fall out of alignment. And transition focuses on existing infrastructure and avoids new build, to prevent carbon lock-in.

Those principles are why the Phase 2B additions for air transport and iron and steel matter to a lending desk. The Phase 2B prototype adds practical transition pathways for air transport and iron and steel, sectors the HKMA identifies as hard to abate, with the stated aim of channelling capital towards their progressive decarbonisation. The enabling technologies, battery manufacture and recycling and the manufacture of low-carbon technologies, extend the same logic upstream to the supply chains those transitions depend on.

For product teams, the sunset-date principle is the operational catch. A transition label comes with an expiry condition. A financing structured today against a transition activity needs to account for the point at which that activity must meet the green threshold or lose alignment. That is a covenant and monitoring question as much as a classification one.

The new adaptation methodology: whitelist versus non-whitelist

Climate change adaptation entered the taxonomy in Phase 2A. Phase 2B builds out how adaptation activities are actually assessed, and the design reflects a real problem: adaptation is intensely location-specific, so the measures that address a given climate risk vary with local circumstances. The HKMA’s answer is a process-based approach, a systematic framework that guides the market on whether a measure makes a substantial contribution to adaptation and manages the risk of maladaptation.

The consultation paper defines maladaptation as a counterproductive outcome from a poorly designed measure, for example transferring flood risk to a neighbouring area while protecting one site. An adaptation measure that solves one exposure and creates another does not meet the standard.

Phase 2B introduces 24 adaptation measures, split into 11 whitelist measures and 13 non-whitelist measures, with an initial focus on shoreline protection and flood management. The whitelist and non-whitelist labels are the distinction to internalise. A whitelist measure has been through rigorous assessment and can be adopted directly, deemed to comply with the taxonomy. A non-whitelist measure carries no such presumption and must be run through the process-based approach before it can be treated as aligned. For a lender financing coastal or drainage resilience, that is the difference between a straightforward classification and a documented assessment exercise, and it should be built into the due-diligence workflow early, before it surfaces at credit-committee stage.

Interoperability with the EU and Mainland China

The Hong Kong Taxonomy was built to line up with its neighbours from the start. Phase 1 operationalised the Common Ground Taxonomy developed by the International Platform on Sustainable Finance, which maps the shared ground between the EU and Mainland China taxonomies. That choice positions Hong Kong as a bridge for cross-border sustainable finance, and Phase 2B keeps a level of comparability with international standards while adding locally tailored criteria for Hong Kong’s economic structure.

For a bank or asset manager operating across jurisdictions, interoperability is a practical convenience with a firm limit. The Common Ground Taxonomy is a voluntary reference tool comparing commonalities and differences between the EU and China taxonomies; it does not create a single taxonomy or legal equivalence between the two regimes. An activity recognised under the Hong Kong Taxonomy is not automatically aligned for EU Article 8 disclosure, and a European in-scope entity still runs its EU-specific alignment assessment regardless of any Hong Kong classification. Interoperability lowers friction; it does not substitute one jurisdiction’s rules for another’s. Firms that issue labelled instruments across borders should also track how the EU Green Bond Standard and its external reviewer regime interacts with a taxonomy-referenced framework.

What banks, lenders and fund managers should do before 7 October

The consultation itself is the first action. The HKMA prioritised the Phase 2B activities through a stakeholder process supported by the Climate Bonds Initiative, weighing scientific pathways, sectoral emissions profiles, regional decarbonisation goals and financing needs. The appendix to the consultation paper sets out the questions the HKMA wants answered, and a firm that relies on the taxonomy for real product decisions has a direct interest in the criteria that emerge. Responses are due by 7 October 2026.

Beyond the response, the work is a mapping exercise. Firms that reference the Taxonomy should assess the Phase 2B prototype for potential future impact, but should not redesign current classifications solely on the consultation text. For the reclassified land-transport activities, the prototype states that existing Phase 2A alignments remain unaffected and can retain their existing labelling; new assessments are to use the latest classification framework with effect from publication of Phase 2B. The scale of the market makes this a live exercise: Hong Kong’s green and sustainable debt issuance exceeded US$84 billion in 2024, and there were 203 SFC-authorised ESG funds holding US$152.3 billion in assets by September 2025, according to HKMA and SFC data compiled by the Hong Kong Institute for Monetary and Financial Research. Those market-size figures do not establish that every debt instrument or ESG fund references the Hong Kong Taxonomy; Phase 2B is directly relevant where a product, framework or classification actually uses the Taxonomy.

Eligibility for support schemes is the other thread worth checking. The Government’s Green and Sustainable Finance Grant Scheme, extended to 2027, subsidises eligible bond issuers and loan borrowers and covers transition bonds and loans. The current GSF Grant Scheme materials refer to Hong Kong Taxonomy Phase 2A. Instruments referencing the Hong Kong Taxonomy may qualify for Track I and/or Track II subject to the scheme criteria, and from 24 April 2026 eligible Track II expenses receive a 75% subsidy for bonds or loans aligned with the Taxonomy, compared with 50% where they are not aligned. Phase 2B remains a consultation prototype and is not the operative scheme version. The taxonomy also connects to the wider disclosure ecosystem, including Hong Kong’s roadmap for large publicly accountable entities to fully adopt the ISSB Standards no later than 2028, though the taxonomy remains a voluntary input to those disclosures and does not by itself trigger a reporting duty.

Frequently Asked Questions

Is using the Hong Kong Taxonomy mandatory for banks or fund managers in Hong Kong?

No. The Hong Kong Taxonomy is a voluntary classification framework that the HKMA describes as a market-enabling tool. It carries no statutory disclosure obligation comparable to the EU Taxonomy’s Article 8 rules. Firms use it to define green and transition activities for product design, framework alignment and investment decisions, and the consultation does not change that voluntary status.

Does an activity have to meet all six environmental objectives to be aligned?

No. Phase 2B defines six environmental objectives, but it continues to focus detailed taxonomy development on climate change mitigation and climate change adaptation. The prototype states that DNSH is not yet fully considered and that detailed DNSH criteria across the relevant objectives are for future iterations; for now, the adaptation process-based approach includes generic DNSH principles relating to climate change mitigation.

What is the difference between a whitelist and a non-whitelist adaptation measure?

A whitelist measure has been through rigorous assessment and can be adopted directly, deemed to comply with the taxonomy. A non-whitelist measure has no such presumption and must be evaluated through the process-based approach, including a check against maladaptation risk, before it can be treated as aligned. Phase 2B introduces 24 adaptation measures, comprising 11 whitelist measures and 13 non-whitelist measures.

Our green bond framework already references Phase 2A. Do we need to revisit it?

Not automatically. Phase 2B is a consultation prototype. For the reclassified land-transport activities, the prototype says existing Phase 2A alignments remain unaffected and may retain existing labelling; new assessments are to use the Phase 2B classification only with effect from publication of Phase 2B. Review a Phase 2A-linked framework where the final Phase 2B changes criteria relevant to future assessments.

How does the Hong Kong Taxonomy relate to the EU Taxonomy for a bank with European operations?

They are interoperable through the Common Ground Taxonomy, which maps shared activities between the EU and Mainland China systems, but they are legally distinct. A Hong Kong classification does not satisfy EU Article 8 disclosure, and an EU in-scope entity still performs its EU alignment assessment separately. Interoperability reduces friction for cross-border products; it does not merge the two rulebooks.

What happens after the consultation closes on 7 October 2026?

The HKMA will consider the feedback and refine the prototype before publishing a final Phase 2B. The precedent is Phase 2A, where a prototype consultation in September 2025 led to a finalised version in January 2026. The HKMA has not published a fixed date for the final Phase 2B, so plan against the Phase 2A sequence and do not assume a fixed finalisation date.

Does the taxonomy change what a corporate borrower has to report?

Not directly. The taxonomy classifies activities; it does not impose a reporting return on borrowers. Where it bites is in the labelling and framework alignment a lender applies to a facility, and in eligibility for schemes such as the Green and Sustainable Finance Grant Scheme. A borrower may need to evidence that an activity meets the technical criteria, but that flows from the financing arrangement, not from a taxonomy filing requirement.

Related Articles

• Hong Kong Taxonomy Phase 2A: Transition and Adaptation: how the January 2026 phase broadened scope to 25 activities and first introduced climate change adaptation.
• EU Taxonomy Article 8 KPI Disclosure: the mandatory European alignment disclosure that contrasts with Hong Kong’s voluntary model.
• CSRD Sustainability Reporting: the EU corporate sustainability reporting regime that sits alongside taxonomy alignment.
• EU Green Bond External Reviewers and Issuer Reporting: how labelled green bonds are reviewed and reported under the EU standard.
• ECB Nature-Related Risk Good Practices: supervisory expectations on the biodiversity and nature themes that Phase 2B now names as objectives.
• FCA Climate Reporting Rules and Product Disclosure: a third jurisdiction’s approach to climate-related product classification and disclosure.

Key Takeaways

• The Hong Kong Taxonomy Phase 2B prototype consultation runs from 7 September to 7 October 2026; responses are due by the closing date.
• Climate change mitigation activities rise from 25 to 39, driven by 10 new activities across Transportation, Manufacturing and Waste plus re-categorised Phase 2A activities, so reconcile line by line instead of counting a simple delta.
• Phase 2B defines four new environmental objectives for a total of six and uses that six-objective structure as the backbone for DNSH assessment, but the prototype states that DNSH is not yet fully considered and that detailed DNSH criteria are for future iterations.
• Detailed activity criteria at this stage sit with mitigation and adaptation; treat biodiversity, water, pollution and circular economy as the DNSH backbone direction and watch the consultation for how far operational detail extends.
• New transition pathways for air transport and iron and steel, plus battery and low-carbon technology manufacture, bring hard-to-abate borrowers inside the framework, subject to time-bound sunset dates.
• Adaptation gains a process-based methodology and 24 measures, split 11 whitelist and 13 non-whitelist, with non-whitelist measures requiring a maladaptation-aware assessment.
• The taxonomy stays voluntary and interoperable with the EU and Mainland China via the Common Ground Taxonomy, but it does not satisfy EU Article 8 disclosure.

Sources and References

• HKMA, “HKMA launches public consultation on Phase 2B prototype of Hong Kong Taxonomy for Sustainable Finance”, press release, 7 September 2026: hkma.gov.hk/eng/news-and-media/press-releases/2026/09/20260907-3/
• HKMA, “Prototype of Hong Kong Taxonomy for Sustainable Finance (Phase 2B)”, consultation paper, September 2026: brdr.hkma.gov.hk (Phase 2B consultation paper, PDF)
• HKMA, “HKMA publishes Hong Kong Taxonomy for Sustainable Finance Phase 2A”, press release, 22 January 2026: hkma.gov.hk/eng/news-and-media/press-releases/2026/01/20260122-3/
• HKMA, “Hong Kong Taxonomy for Sustainable Finance (Phase 2A)”, 22 January 2026: brdr.hkma.gov.hk (Phase 2A, PDF)
• HKMA, “Guideline on the Green and Sustainable Finance Grant Scheme” (effective 24 April 2026): hkma.gov.hk (GSF Grant Scheme Guideline, PDF)
• Hong Kong Institute for Monetary and Financial Research, “Navigating the Green Shift”, April 2026 (green and sustainable debt, ESG fund and Cross-Agency Steering Group data): aof.org.hk/docs/default-source/hkimr/applied-research-report/tfrep.pdf
• Financial Services and the Treasury Bureau, Green and Sustainable Finance in Hong Kong (Cross-Agency Steering Group and grant schemes): fstb.gov.hk/en/financial_ser/green-and-sustainable-finance.htm
• Government of Hong Kong, Climate Action Plan 2050: info.gov.hk/gia/general/202110/08/P2021100800588.htm

Marking 7 October on the reporting calendar

Phase 2B is a prototype under consultation, not a final Taxonomy update. The HKMA states that the Taxonomy is currently designed for voluntary adoption and says that incorporation into banking supervisory policies will be explored in the longer term. The pressure point is commercial and reputational: every green bond framework, transition loan, and fund classification that leans on the Hong Kong Taxonomy is now leaning on a definition that is being redrawn. Before 7 October 2026, firms that use the Taxonomy can review the prototype against relevant products and submit comments on affected criteria. Implementation changes should be based on the final Phase 2B, and detailed cross-objective DNSH criteria are not yet part of the prototype.

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