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Hong Kong prepares transition finance framework to support development as an international green finance hub
- The city will refer to what others are doing so that there are not too many differences in the transition taxonomy between banks in different jurisdictions: HKMA deputy CEO Darryl Chan
- Prototype will be rolled out for banks first, Chan says
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The Hong Kong Monetary Authority (HKMA) is preparing a transition finance framework to classify whether activities can help carbon-intensive firms reach net-zero emissions, to support the development of the city as an international green and sustainable finance hub.
The HKMA has been developing a local “green taxonomy” framework for classifying economic activities considered environmentally friendly or sustainable, and the next step will be broadening that to include transition financing, said deputy CEO Darryl Chan Wai-man.
“We will start preparing for a transition taxonomy this year,” Chan said. “This will be the next phase in our work” to develop a local green classification framework.
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“A taxonomy is very important for transition financing, so that banks have a common standard to follow in terms of the issuance of bonds and loans.”
Transition finance refers to bonds and loans that help companies turn their carbon-intensive operations into climate-neutral outfits aligned with global green ambitions.
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The development of transition finance has been identified as a key initiative for 2024 by the Green and Sustainable Finance Cross-Agency Steering Group, a body established in May 2020 by financial regulators in Hong Kong such as the Securities and Futures Commission and the HKMA, as well as other government bureaus to accelerate the growth of green and sustainable finance in Hong Kong.
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