Hong Kong is poised to become the first jurisdiction to make use of the Common Ground Taxonomy (CGT) as its de facto central bank laid out plans for a green taxonomy.

The Hong Kong Monetary Authority (HKMA) commissioned the Climate Bonds Initiative, a UK-headquartered non-profit body that promotes investment in the low-carbon economy, to develop its framework for classifying and labelling financial products and investments based on their environmental sustainability.

The HKMA noted in its consultation that as taxonomies have multiplied across the world, concerns over market fragmentation have meant that there have been efforts to harmonise different taxonomies, the most notable of which is the CGT.

The CGT was developed by People’s Bank of China and the European Commission with the aim of providing a comparative study of the green taxonomies of both China and the EU. It was first published in November 2021 at COP26.

The HKMA plans to develop its taxonomy in phases. In the current phase, it plans to role out a prototype, which will contain a limited number of sectors, activities and additional operational tools.

The prototype focuses on specific activities in the energy, transport, buildings, waste and water sectors to demonstrate different principles and ideas that could be further used for the building of a full-scale taxonomy.

Other sectors that are equally important for the purpose of climate change mitigation (such as heavy industries and carbon intensive manufacturing sectors such as aluminium, cement and steel) will be considered in the next phase when the taxonomy expands to cover other activities.

Respondents have until 30 June to submit their feedback to the consultation and the HKMA plans to fine-tune the prototype and summarise the consultation with recommendations on the future work around the third quarter of this year.