Consultation Report: Prototype for a Green Classification Framework for Hong Kong

Discussion Paper
Prototype of a Green
Classification Framework for Hong Kong
Annex

Supported by

2
Table of Contents
Prototype spreadsheet: ..................................................................................................................................... 4
Sector: Electricity, Gas, Steam and Air Conditioning Supply ......................................................................... 13
Electric power generation, transmission and distribution ........................................................................ 13
Overview .................................................................................................................................................. 13
Metrics ..................................................................................................................................................... 13
Criteria and thresholds ............................................................................................................................ 14
Activity cards ........................................................................................................................................... 14
Electricity generation using concentrated solar power technology.................................................... 14
Electricity generation using solar photovoltaic technology ................................................................ 15
Electricity generation from wind power .............................................................................................. 15
Sector: Transportation and Storage ............................................................................................................... 17
Land transport including railways .............................................................................................................. 17
Overview .................................................................................................................................................. 17
Metrics ..................................................................................................................................................... 17
Criteria and thresholds ............................................................................................................................ 18
Construction and operation of public transportation system in urban and rural areas ..................... 18
Construction and operation of personal mobility devices, cycle logistics .......................................... 18
Activity cards ........................................................................................................................................... 19
Construction and operation of public transportation system in urban and rural areas ..................... 19
Construction and operation of personal mobility devices, cycle logistics .......................................... 20
Water Transport .......................................................................................................................................... 20
Overview .................................................................................................................................................. 20
Metrics: .................................................................................................................................................... 21
Criteria and thresholds ............................................................................................................................ 21
Activity cards ........................................................................................................................................... 22
Transportation of freight by sea .......................................................................................................... 22
Transportation of passengers by sea ................................................................................................... 23
Sector: Water supply; sewerage, waste management and remediation activities ...................................... 26
Sewage sludge treatment ........................................................................................................................... 26
Overview .................................................................................................................................................. 26
Metrics ..................................................................................................................................................... 26
Criteria and thresholds ............................................................................................................................ 27
Sewage sludge treatment – anaerobic digestion ................................................................................ 27
Activity cards ........................................................................................................................................... 27
Sewage sludge treatment – anaerobic digestion ................................................................................ 27
Waste Collection, Treatment and Recycling .............................................................................................. 28

3
Overview .................................................................................................................................................. 28
Metrics ..................................................................................................................................................... 29
Criteria and thresholds ............................................................................................................................ 30
Collection and transport of non-hazardous waste in source segregated fractions ............................ 30
Utilisation/ treatment of domestic waste –anaerobic digestion ........................................................ 31
Activity cards ........................................................................................................................................... 32
Collection and transport of non-hazardous waste in source segregated fractions ............................ 32
Utilisation/ treatment of domestic waste – anaerobic digestion ....................................................... 33
Sector: Construction ....................................................................................................................................... 34
Construction and renovation of buildings ................................................................................................. 34
Overview .................................................................................................................................................. 34
Metrics ..................................................................................................................................................... 34
Criteria and alignment ............................................................................................................................. 36
For the construction of new commercial buildings in Hong Kong: ..................................................... 37
For the construction of new residential buildings in Hong Kong: ....................................................... 37
For the construction of new commercial and residential buildings outside Hong Kong: ................... 37
For the renovation of commercial buildings: ...................................................................................... 38
For the renovation of residential buildings: ........................................................................................ 38
Questions and outstanding issues ........................................................................................................... 38
Activity cards ........................................................................................................................................... 39
Renovation of existing buildings .......................................................................................................... 39
Construction of new buildings ............................................................................................................. 40

4
Prototype spreadsheet:
HSIC
Industry
Section
HSIC
Industry
Division
(2 Digit)
HSIC Industry
Group (3 Digit) HSIC Industry Class (4 digit) (Corresponding ISIC / NACE) HSIC Industry Sub-class (6 Digit) Prototype Activities Eligibility to be green Taxonomylevel activity Description Closest Taxonomy Alignment Key metrics Substantial contribution criteria Layer 1 Layer 2 Layer 3 F- Construction 41 - Construction of buildings 411: Erection of architectural superstructures, building construction 4110: Erection of architectural superstructures, building construction (ISIC: 4100 - Construction of Buildings) (NACE: 41.10 - Development of building projects; 41.20 - Construction of residential and non-residential buildings) 411000:
Erection of architectural superstructur es, building construction Construction of new buildings Construction of new buildings CGT F1.1 Construction of new buildings
1) Primary Energy Demand: Amount
of energy that must be generated originally in order to meet the total energy demand of a building (kWh/m2)
2) Energy Consumption: Total amount
of electricity or equivalent electricity, and gas consumed by the building per annum (kWh/m2/year)
3) Direct emissions of building:
Greenhouse gases emitted from activities under the tenant or landlords' control - (KgCO2/m2/year) Please refer to the activity card for the full set of criteria 412: Structural steel framework erection 4120: Structural steel framework erection (ISIC: 4100 - Construction of Buildings) (NACE: 41.10 - Development of building projects; 41.20 - Construction of residential and non-residential buildings) 412000:
Structural steel framework erection 419: Other new building construction works 4191: Structural alteration and addition works (ISIC: 4100 - Construction of Buildings) (NACE: 41.10 - Development of building projects; 41.20 - Construction of residential and non-residential buildings) 419100:
Structural alteration and addition works 43 - Specialised construction activities 432-Building services installation and maintenance activities 4321-Electrical equipment installation and maintenance (ISIC: 4321 - Electrical Installation) (NACE: 43.21 - Electrical installation) 4321XX:
Electrical equipment installation and maintenance 4322-Ventilation, gas and water fitting installation and maintenance activities (ISIC: 4322 - Plumbing, Heat and Air-Conditioning Installation) (NACE: 43.22 - Plumbing, heat and air-conditioning installation) 4322XX:
Ventilation, gas and water fitting installation and maintenance activities

5
HSIC
Industry
Section
HSIC
Industry
Division
(2 Digit)
HSIC Industry
Group (3 Digit) HSIC Industry Class (4 digit) (Corresponding ISIC / NACE) HSIC Industry Sub-class (6 Digit) Prototype Activities Eligibility to be green Taxonomylevel activity Description Closest Taxonomy Alignment Key metrics Substantial contribution criteria Layer 1 Layer 2 Layer 3 4329-Other construction installation and maintenance (ISIC: 4329 - Other Construction Installation) (NACE: 43.29 - Other construction installation) 4329XX:
Other construction installation and maintenance 439 - Building finishing and other specialised construction activities 4391-Decoration, repair and maintenance for buildings (ISIC: 4330 - Building Completion and Finishing) (NACE: 43.3 - Building completion and finishing) 439101:
Interior fitting, decoration and repairs for buildings 4399-Other general finishing and specialised construction works (ISIC:4390 - Other Specialized Construction Activities) (NACE: 43.9 - Other specialised construction activities) 4399XX:
Other general finishing and specialised construction works F- Construction 41 - Construction of buildings 419: Other new building construction works 4191: Structural alteration and addition works (ISIC: 4100 - Construction of Buildings) (NACE: 41.10 - Development of building projects; 41.20 - Construction of residential and non-residential buildings) 419100:
Structural alteration and addition works Renovation of existing buildings Renovation of existing buildings CGT F1.2 Renovation of existing buildings
1) Primary Energy Demand: Amount
of energy that must be generated originally in order to meet the total energy demand of a building (kWh/m2)
2) Energy Consumption: Total amount
of electricity or equivalent electricity, and gas consumed by the building per annum (kWh/m2/year)
3) Direct emissions of building:
Greenhouse gases emitted from activities under the tenant or landlords' control - (KgCO2/m2/year) Please refer to activity card for the full criteria 43 - Specialised construction activities 432-Building services installation and maintenance activities 4321-Electrical equipment installation and maintenance (ISIC: 4321 - Electrical Installation) (NACE: 43.21 - Electrical installation) 4321XX:
Electrical equipment installation and maintenance

6
HSIC
Industry
Section
HSIC
Industry
Division
(2 Digit)
HSIC Industry
Group (3 Digit) HSIC Industry Class (4 digit) (Corresponding ISIC / NACE) HSIC Industry Sub-class (6 Digit) Prototype Activities Eligibility to be green Taxonomylevel activity Description Closest Taxonomy Alignment Key metrics Substantial contribution criteria Layer 1 Layer 2 Layer 3 4322-Ventilation, gas and water fitting installation and maintenance activities (ISIC: 4322 - Plumbing, Heat and Air-Conditioning Installation) (NACE: 43.22 - Plumbing, heat and air-conditioning installation) 4322XX:
Ventilation, gas and water fitting installation and maintenance activities 4329-Other construction installation and maintenance (ISIC: 4329 - Other Construction Installation) (NACE: 43.29 - Other construction installation) 4329XX:
Other construction installation and maintenance 439 - Building finishing and other specialised construction activities 4391-Decoration, repair and maintenance for buildings (ISIC: 4330 - Building Completion and Finishing) (NACE: 43.3 - Building completion and finishing) 4391XX:
Decoration, repair and maintenance for buildings 4399-Other general finishing and specialised construction works (ISIC:4390 - Other Specialized Construction Activities) (NACE: 43.9 - Other specialised construction activities) 439101:
Interior fitting, decoration and repairs for buildings

7
HSIC
Industry
Section
HSIC
Industry
Division
(2 Digit)
HSIC
Industry
Group
(3 Digit)
HSIC Industry Class (4 digit)
(Corresponding ISIC / NACE)
HSIC
Industry
Sub-class (6
Digit)
Prototype Activities
Eligibility to be green
Taxonomylevel activity Description Closest Taxonomy Alignment Key metrics Substantial contribution criteria Layer 1 Layer 2 Layer 3 D - Electricity and gas supply 35-Electric and gas supply 351-Electric power generation, transmission and distribution 3510 - Electric power generation, transmission and distribution (ISIC: 3510 - Electric power generation, transmission and distribution) (NACE:35.11 - Production of electricity) 35100- Electric power generation, transmission and distribution Electricity generation using concentrated solar power Electricity generation using concentrated solar power (CSP) technology. Construction and operation of facilities using solar thermal power to generate electricity. CGT D1.2 Electricity generation using concentrated solar power (CSP) technology gCO2/kWh: Reflects the emissions intensity for electricity generation, and is based on life cycle emissions to account for GHG emissions throughout the value chain of energy production processes Please refer to activity card for the full criteria. Automatically eligible if use of proceeds complies with activity description. Electricity generation using solar photovoltaic technology Electricity generation using solar photovoltaic (solar PV) technology. Construction and operation of facilities using concentrated solar photovoltaic power to generate electricity. CGT D1.1 Electricity generation using solar photovoltaic technology Please refer to activity card for the full criteria. Automatically eligible if use of proceeds complies with activity description. Additional requirements for projects in:
Mainland China

Electricity generation from wind power
Construction or operation of electricity generation facilities that produce electricity from wind power. CGT D1.3 Electricity generation from wind power Please refer to activity card for the full criteria. Automatically eligible if use of proceeds complies with activity description.

8
HSIC
Industry
Section
HSIC
Industry
Division
(2 Digit)
HSIC
Industry
Group
(3 Digit)
HSIC Industry Class (4 digit)
(Corresponding ISIC / NACE)
HSIC
Industry
Sub-class (6
Digit)
Prototype Activities
Eligibility to be green
Taxonomylevel activity Description Closest Taxonomy Alignment Key metrics Substantial contribution criteria Layer 1 Layer 2 Layer 3 H- Transportation, storage, postal and courier services 49 - Land Transport 491-Railway and cable transport 4910-Railway and cable transport (ISIC: 4921 - Urban and Suburban Passenger Land Transport) (NACE: 49.31 - Urban and suburban passenger land transport) 491000- Railway and cable transport Construction and operation of public transportation system in urban and rural areas Purchase, financing, leasing, rental and operation of urban and suburban transport vehicles for passengers and road passenger transport. This includes construction and operation of subways, light railways, tram, and other urban rail transportation facilities; construction and operation of high-capacity public transportation facilities, such as BRT bus stations, lines and other facilities construction and operation; purchase of public transportation vehicles, etc. CGT H1.1. Construction and operation of public transportation system in urban and rural areas Emission reduction thresholds are based on performance metrics:

CO2e emissions per
passenger kilometre
(gCO2e/pkm);
CO2e emissions per
vehicle kilometre
(gCO2e/vkm);
CO2e emissions per
tonne kilometre
(gCO2e/tkm).
Please refer to activity card for the full criteria.
1) The trains and passenger
coaches have zero direct
(tailpipe) CO2 emissions
Additional requirements for projects in:
EU
492 - Land Transport by road
4921 - Public bus services
(ISIC: 4921 - Urban and Suburban
Passenger Land Transport)
(NACE: 49.31 - Urban and suburban passenger land transport) 492100 - Public bus services 4923 - Non-scheduled public light bus services (ISIC: 4922 - Other Passenger Land Transport) (NACE: 49.39 - Other passenger land transport n.e.c.) 492300 - Nonscheduled public light bus services 4924- Scheduled public light bus services (ISIC: 4922 - Other Passenger Land Transport) (NACE: 49.39 - Other passenger land transport n.e.c.) 492400 - Scheduled public light bus services 4925 - School bus services (ISIC: 4922 - Other Passenger Land Transport) (NACE: 49.39 - Other passenger land transport n.e.c.) 492500 - School bus services

9
HSIC
Industry
Section
HSIC
Industry
Division
(2 Digit)
HSIC
Industry
Group
(3 Digit)
HSIC Industry Class (4 digit)
(Corresponding ISIC / NACE)
HSIC
Industry
Sub-class (6
Digit)
Prototype Activities
Eligibility to be green
Taxonomylevel activity Description Closest Taxonomy Alignment Key metrics Substantial contribution criteria Layer 1 Layer 2 Layer 3 H- Transportation, storage, postal and courier services 49 - Land Transport 499 - Other land transport services 4990 - Other land transport services (ISIC: 4922 - Other Passenger Land Transport) (NACE: 49.39 - Other passenger land transport n.e.c.) 499000 - Other land transport services Construction and operation of personal mobility devices, cycle logistics Selling, purchasing, financing, leasing, renting and operation of personal mobility or transport devices where the propulsion comes from the physical activity of the user, from a zero emissions motor, or a mix of zero-emissions motor and physical activity. This specifically also includes:

Construction of urban
walking and cycling transportation systems, including public bicycle rental sites, non-motorized vehicle parking facilities, road crossing facilities and other slow-moving urban systems.
Construction and operation
of shared transportation infrastructure, such as systems for public rental bicycles, online bicycle rental, online electric bicycle rental, online car rental, car sharing, parking facilities and equipment, and bicycle parking facilities.
The provision of freight
transport services by (cargo) bicycles.
Selling, purchasing,
financing, leasing, renting and operation of private electric or hydrogen vehicles CGT H1.5. Construction and operation of personal mobility devices, cycle logistics Emission reduction thresholds are based on performance metrics:
CO2e emissions per
passenger kilometre
(gCO2e/pkm);
CO2e emissions per
vehicle kilometre
(gCO2e/vkm);
CO2e emissions per
tonne kilometre
(gCO2e/tkm).
Please refer to activity card for the full criteria.
1) Automatically eligible if the
propulsion of personal mobility devices comes from the physical activity of the user, from a zeroemissions motor (zero tailpipe emissions), or a mix of zeroemissions motor and physical activity.
2) The personal mobility devices
are allowed to be operated on the same public infrastructure as bikes or pedestrians.

10
HSIC
Industry
Section
HSIC
Industry
Division
(2 Digit)
HSIC
Industry
Group
(3 Digit)
HSIC Industry Class (4 digit)
(Corresponding ISIC / NACE)
HSIC
Industry
Sub-class (6
Digit)
Prototype Activities
Eligibility to be green
Taxonomylevel activity Description Closest Taxonomy Alignment Key metrics Substantial contribution criteria Layer 1 Layer 2 Layer 3 H- Transportation, storage, postal and courier services 50- Water transport 501-Cross-border water transport 5013-Ship owners of sea-going vessels (ISIC: 5011 - Sea and Coastal Passenger Water Transport; 5012 - Sea and Coastal Freight Water Transport) (NACE: 50.10 - Sea and coastal passenger water transport; 50.20 - Sea and coastal freight water transport) 501301:
Ship owners of sea-going vessels for passenger transport Transportation of passengers by sea Transportation of passengers by sea Climate Bonds Criteria

Annual Efficiency Ratio
(AER): The ratio of a ship's carbon emissions per actual capacitydistance (e.g., deadweight tonnage per nautical mile (dwt-nm), which is a measure of a ship’s weight carrying capacity (not including the empty weight of the ship) x distance.
Energy Efficiency
Operational Indicator
(EEOI): The total operational emissions to satisfy transport work demanded, this is usually quantified over a period of time which encompasses multiple voyages (e.g. a year). The ratio of a ship's carbon emissions per unit of transport work (e.g., Tonne-nm (t-nm) is a measure of useful work done and is calculated as deadweight carried X distance).
Dry bulk by tonnes
carried (Tonnes)
Volume of coal
transported (Tonnes)
Please refer to activity card for the full criteria.
1) the ship must report an
operational emissions intensity
(using AER or EEOI) according to the criteria table below.
Compliance can be reported by either AER or EEOI for a specific timeframe. For passenger vessels the denominator is GTnm (gross tonne- nautical mile). 5014-Operators of sea-going vessels (ISIC: 5011 - Sea and Coastal Passenger Water Transport; 5012 - Sea and Coastal Freight Water Transport) (NACE: 50.10 - Sea and coastal passenger water transport; 50.20 - Sea and coastal freight water transport) 501401:
Operators of sea-going vessels for passenger transport 5013-Ship owners of sea-going vessels (ISIC: 5011 - Sea and Coastal Passenger Water Transport; 5012 - Sea and Coastal Freight Water Transport) (NACE: 50.10 - Sea and coastal passenger water transport; 50.20 - Sea and coastal freight water transport) 501302:
Ship owners of sea-going vessels for freight transport Transportation of freight by sea Transportation of freight by sea Climate Bonds Criteria Please refer to activity card for the full criteria.
1) The ship must report an
operational emissions intensity
(using AER or EEOI) according to the criteria table below.
Compliance can be reported by either AER or EEOI. For freight the denominator is tnm (tonnenautical mile)
2) Excluded assets:
Crude oil tankers and liquefied
gas tankers
Dry bulk carriers IF
transporting more than 20% of fossil fuels annually
Assets used for the
exploration or production of fossil fuels (floating production, supply and offloading (FPSO) vessels; subsea, umbilicals, risers, flowlines (SURF) vessels; drilling units; platform supply vessels; well intervention vessels. 5014-Operators of sea-going vessels (ISIC: 5011 - Sea and Coastal Passenger Water Transport; 5012 - Sea and Coastal Freight Water Transport) (NACE: 50.10 - Sea and coastal passenger water transport; 50.20 - Sea and coastal freight water transport) 501402:
Operators of sea-going vessels for freight transport

11
HSIC
Industry
Section
HSIC
Industry
Division
(2 Digit)
HSIC
Industry
Group
(3 Digit)
HSIC Industry Class (4 digit)
(Corresponding ISIC / NACE)
HSIC
Industry
Sub-class (6
Digit)
Prototype Activities
Eligibility to be green
Taxonomylevel activity Description Closest Taxonomy Alignment Key metrics Substantial contribution criteria Layer 1 Layer 2 Layer 3 E - Water Supply; Sewerage, Waste Management And Remediation Activities 37 - Sewerage 370 - Sewerage 3700 – Sewerage (ISIC: 3700 - Sewerage) (NACE: 37.00 - Sewerage) 370000 Sewerage Sewage sludge treatment – anaerobic digestion Construction and operation of facilities for the treatment of sewage sludge by anaerobic digestion with the resulting production and utilization of biogas or chemicals. CGT E1.1 Sewage sludge treatment – anaerobic digestion

Tonnes CH4 per year
Please refer to activity card for the full criteria.
1) A monitoring and contingency
plan is in place in order to minimise methane leakage at the facility
2) The produced biogas is used
directly for the generation of electricity or heat, or upgraded to bio-methane for injection in the natural gas grid, or used as vehicle fuel or as feedstock in chemical industry
3) If anaerobic digestion is used
in the facilities which produce power and/ or heat:
total lifecycle methane emissions should not exceed 1,285g CH4/tonnes of waste input 38- Waste collection, treatment and disposal activities; materials recovery 381-Waste collection 3811-Collection of non-hazardous waste (ISIC: 3811 - Collection of Non-Hazardous Waste) (NACE: 38.11 - Collection of nonhazardous waste) 381100 Collection of nonhazardous waste Collection and transport of non-hazardous waste in source segregated fractions Collection and transport of non-hazardous waste in source segregated fractions CGT E2.1Collection and transport of non-hazardous waste in source segregated fractions No specific quantifiable metrics necessary for the activity in question Please refer to activity card for the full criteria.
1) All separately collected and
transported non-hazardous waste that is segregated at source is intended for preparation for reuse or recycling operations
2) Bins used to collect waste
should be made from 100% of recycled plastic

12
HSIC
Industry
Section
HSIC
Industry
Division
(2 Digit)
HSIC
Industry
Group
(3 Digit)
HSIC Industry Class (4 digit)
(Corresponding ISIC / NACE)
HSIC
Industry
Sub-class (6
Digit)
Prototype Activities
Eligibility to be green
Taxonomylevel activity Description Closest Taxonomy Alignment Key metrics Substantial contribution criteria Layer 1 Layer 2 Layer 3 E - Water Supply; Sewerage, Waste Management And Remediation Activities 38- Waste collection, treatment and disposal activities; materials recovery 382-Waste treatment and disposal 3821-Treatment and disposal of nonhazardous waste (ISIC: 3821 - Treatment and Disposal Of Non-Hazardous Waste) (NACE: 38.21 - Treatment and disposal of non-hazardous waste) 382100 Treatment and disposal of nonhazardous waste Utilisation/ treatment of domestic waste – anaerobic digestion Construction and operation of dedicated facilities for the treatment of separately collected bio-waste through anaerobic digestion with the resulting production and utilisation of biogas and digestate and/or chemicals. CGT E2.4 Utilization/ treatment of domestic waste – anaerobic digestion

Tonnes CH4 per year
% of food and feed
crops used as feedstock
Please refer to activity card for the full criteria.
1) A monitoring and contingency
plan is in place in order to minimise methane leakage
2) The produced biogas is used
directly for the generation of electricity or heat, or upgraded to bio-methane for injection in the natural gas grid, or used as vehicle fuel or as feedstock in chemical industry
3) The bio-waste that is used for
anaerobic digestion is source segregated and collected separately
4) The produced digestate is
used as fertiliser or soil improver
5) Food and feed crops used as
input feedstock, measured in weight, as an annual average, is less than or equal to 10% of the input feedstock
6) If anaerobic digestion is used
in the facilities which produce power and/ or heat:
total lifecycle methane emissions should not exceed 1,285g CH4/tonnes of waste input

13
Sector: Electricity, Gas, Steam and Air
Conditioning Supply
Electric power generation, transmission and distribution Overview Hong Kong is determined to achieve carbon neutrality before 2050. 1 In the 2021 policy address, the Chief Executive called on the power companies to phase down coal-fired generation units and replace the use of coal with other alternatives such as natural gas and renewable energy for electricity generation. She reaffirmed the government's efforts to grapple with Hong Kong’s geographical and environmental constraints in driving the development of renewable energy and strive to increase its share in the fuel mix for electricity generation through facilitating local projects, regional collaboration and joint ventures. 2 Hong Kong’s power sector accounted for approximately 66%, or 26.3 MtCO2e of Hong Kong’s total greenhouse gas (GHG) emissions in 2019. 3 Hong Kong’s electricity consumption was 44.1TWh in 2020, a slight decrease from 2019 levels due to the COVID-19 pandemic. In the past 20 years, growth in electricity demand has slowed. Per capita electricity consumption peaked in 2014, the same year that total emissions peaked. In order to reach net-zero electricity generation, Hong Kong's Climate Action Plan 2050, aims to cease the use of coal for daily electricity generation; increase the share of renewable energy in the fuel mix for electricity generation to 7.5% to 10% by 2035, and to 15% subsequently; and to trial the use of new energy and strengthen co-operation with neighbouring regions to achieve the long-term target of netzero electricity generation before 2050. 4 The objective of the following energy sector criteria is to provide clear guidance on what technologies, assets and investments will provide a substantial contribution to climate change mitigation in the context of Hong Kong’s decarbonisation objectives. Metrics  gCO2/kWh To be consistent with other taxonomies including the EU Taxonomy, the primary metric for measuring emissions in the energy sector is gCO2/kWh as this directly reflects the emissions intensity for electricity generation, which is the major source of emissions from the energy sector. The metric is based on life cycle emissions to account for GHG emissions throughout the value chain of energy production processes (e.g., electricity generation from natural gas can have significantly large emissions due to methane leakage during extraction, transportation and distribution in addition to

1 https://www.info.gov.hk/gia/general/202110/08/P2021100800588.htm 2 https://www.policyaddress.gov.hk/2021/eng/p95.html 3 PD. 2021. 2019 Greenhouse Gas Inventory for Hong Kong. https://www. climateready.gov.hk/files/pdf/Greenhouse%20Gas%20Emissions%20 in%20Hong%20Kong%20by%20Sector.pdf 4 https://www.climateready.gov.hk/files/pdf/CAP2050_4_en.pdf

14 combustion and, therefore, a lifecycle-based threshold is useful to check GHG emissions during entire supply chain and not just during combustion). Criteria and thresholds  Lifecycle emission of the installation must not exceed 100gCo2e/kWh A 100gCo2e/kWh threshold applies across all technology types, declining to net-zero by 2050. This reflects international best practice and is aligned with the EU Taxonomy criteria. Derogations can be available for renewable energy technologies which are well recognised to have emissions intensities below this threshold. However, it is noted that in the Common Ground Taxonomy (CGT) there are instances where additional technology specific criteria apply. For example, although solar photovoltaic technologies are well recognised to have lifecycle emissions well below the 100gCo2e/kWh threshold, they are also subject to additional requirements regarding factors such as conversion efficiency. These are aligned with the Green Bond Endorsed Project Catalogue and are designed to help encourage innovation across the technology segment. It is also noted that the Hong Kong Taxonomy should be a ‘living’ document. The threshold and respective derogations mentioned above should be reviewed and updated as the 100gCo2e/kWh threshold declines to 0gCo2e/kWh by 2050. Activity cards Electricity generation using concentrated solar power technology Sector Electricity, gas, steam and air conditioning supply Activity Category Electric power generation, transmission and distribution Activity Description Electricity generation using concentrated solar power (CSP) technology. Construction and operation of facilities using solar thermal power to generate electricity HSIC Code 351000 CGT Code D1.2 Electricity generation using concentrated solar power (CSP) technology Corresponding ISIC Code 3510 Closest EU Taxonomy Code
4.2. Electricity
generation using concentrated solar power (CSP) technology Closest Chinese Green Bond Endorsed Projects Catalogue Codes
3.2.2.2 Construction and
operation of solar energy utilization facilities HSIC Description Operation of generation facilities that produce electric energy; including thermal, nuclear, hydroelectric, gas turbine, diesel and renewable Criteria and Thresholds Main Criteria Automatically eligible if use of proceeds complies with activity description Additional Requirements and Comments None

15
Electricity generation using solar photovoltaic technology Sector Electricity, gas, steam and air conditioning supply Activity Category Electric power generation, transmission and distribution Activity Description Construction or operation of electricity generation facilities that produce electricity using solar photovoltaic (PV) technology HSIC Code 351000 CGT Code D1.1 Electricity generation using solar photovoltaic technology Corresponding ISIC Code 3510 Closest EU Taxonomy Code 4.1. Electricity generation using solar photovoltaic technology Closest Chinese Green Bond Endorsed Projects Catalogue Codes None HSIC Description Operation of generation facilities that produce electric energy; including thermal, nuclear, hydroelectric, gas turbine, diesel and renewable Criteria and Thresholds Main Criteria Automatically eligible if use of proceeds complies with activity description Additional Requirements and Сomments Additional requirements for projects in Mainland China:
The component products selected for solar photovoltaic power generation facilities should meet the following requirements:
1) The minimum photoelectric conversion efficiency of polycrystalline silicon
cells and monocrystalline silicon cells shall not be less than 19% and 21% respectively;
2) The minimum photoelectric conversion efficiency of polycrystalline silicon
cell modules and single crystal silicon battery modules shall not be less than 17% and 17.8% respectively;
3) The minimum photoelectric conversion efficiency of silicon-based, CIGS,
CdTe and other thin-film battery modules shall not be less than 12%, 14%, 14%, 12%;
4) The decay rates of polycrystalline silicon battery modules and
monocrystalline silicon battery modules shall not be higher than 2.5% and 3% in the first year, and not higher than 0.7% per year, and not higher than 20% within the period of 25 years; the attenuation rate of thin-film battery module shall not be more than 5% in the first year, no more than 0.4% per year in the following year, no more than 15% within the period of 25 years. Electricity generation from wind power Sector Electricity, gas, steam and air conditioning supply Activity Category Electric power generation, transmission and distribution Activity Description Construction or operation of electricity generation facilities that produce electricity from wind power

16
HSIC Code 351000 CGT Code D1.3
Electricity generation from wind power
Corresponding
ISIC Code
3510
Closest EU
Taxonomy Code
4.3 Electricity
generation from wind power
Closest Chinese Green
Bond Endorsed Projects
Catalogue Codes
3.2.2.1 Construction and
Operation of Wind Generators
HSIC Description Operation of generation facilities that produce electric energy; including thermal, nuclear, hydroelectric, gas turbine, diesel and renewable Criteria and Thresholds Main Criteria Automatically eligible if use of proceeds complies with activity description Additional Requirements and Comments None

17
Sector: Transportation and Storage
Land transport including railways
Overview
Hong Kong’s population surges from 5.3 million to nearly 7.4 million in the past 4 decades, and, in order to cater to the transport demand, the city has focused on upgrading its transport infrastructure and services for private mobility whilst also building a multi-modal public transportation system. The multi-modal public transport system in Hong Kong consists of a Mass Transit Railway, a tramway, franchised buses, public light buses, taxis, non-franchised buses, and ferry services. It has been estimated that 90% of Hong Kong’s daily passenger trips are by passenger transport, a proportion that is amongst the highest in the world. In 2021, the public transport patronage was about 10.6 million passengers per day, with the railway system being the largest passenger-carrying mode with around 4.29 million passengers per day and the franchised buses coming next with 3.47 million passengers per day. The ferry system carries just about an average of 97,270 passengers daily with 11 franchised and licensed ferry operators running 22 regular passenger ferry services, two dangerous goods vehicular ferry services and two special services at the harbour and to the new towns and outlying islands. 5 Hong Kong’s transport sector accounted for approximately 18%, or 7.2 MtCO2e of Hong Kong’s total GHG emissions in 2019 6 . Road transport (motor vehicles) is the largest source accounting for 89% of GHG emissions within the transport sector. As of 2019 7 , private cars account for the highest share of the motor vehicle fleet, but freight vehicles emitted the largest emissions, contributing 6% of Hong Kong’s total GHG emissions, followed by private cars (4.5%), buses (3.6%), and taxis (1.9%). 8 As per Hong Kong’s Climate Action Plan 2050, the goal for the transport sector is to achieve zero vehicular emissions before 2050. This would require strengthening the public transport system and specifically promoting vehicle (and ferry) electrification. Seeing this as the primary goal, the Hong Kong Government aims to cease registration of new internal combustion engine-based- and hybrid private cars (including plug-in hybrid electric vehicles) by 2035 or earlier. It actively promotes electric vehicles at a large scale for commercial purposes by testing out hydrogen fuel cell electric buses and heavy vehicles. 9 Metrics  CO2e emissions per passenger kilometre (gCO2e/pkm);  CO2e emissions per vehicle kilometre (gCO2e/vkm);  CO2e emissions per tonne kilometre (gCO2e/tkm). As in other taxonomies, the transport sector criteria require that operated fleets to become more efficient over time by linking eligibility to emissions performance below a certain threshold set to

5 https://www.td.gov.hk/mini_site/atd/2022/en/section5-1.html 6 PD. 2021. 2019 Greenhouse Gas Inventory for Hong Kong. https://www. climateready.gov.hk/files/pdf/Greenhouse%20Gas%20Emissions%20 in%20Hong%20Kong%20by%20Sector.pdf 7 Please note that the data and figures refer to years before the Covid-19 pandemic because the years 2020-21- 22 are not representative of the status of the transport sector as economic activity decreased markedly. 8 https://www.climateready.gov.hk/files/pdf/CAP2050_booklet_en.pdf 9 https://civic-exchange.org/wp-content/uploads/2022/10/HK-transport-report_-Final.pdf

18 ensure substantially reduced emissions. Emissions reductions thresholds are based on performance metrics (vehicle km, passenger km or tonne km). Criteria and thresholds Construction and operation of public transportation system in urban and rural areas The type of infrastructure available in a specific jurisdiction is a crucial element of transport behaviour and choice. Transport investments decided by governments can therefore lock in a high carbon transport future when the projects and assets invested in are not aligned with low carbon technologies. In this context, the setting of the criteria for this activity was inspired by long term strategic vision of decarbonisation of the transport sector, as per the Hong Kong’s Climate Action Plan 2050 wherein the goal for the transport sector is to achieve zero vehicular emissions before 2050. In line with other taxonomies (such as the EU, Thailand, Colombia, South Africa), certain transport modes, such as electrified rail transport, are already associated with relatively low carbon emissions whilst electronic vehicles and hydrogen vehicles are singled out as eligible assets as they are a clear part of the low carbon transport sector in 2050. The purpose is to provide a clear signal to the market and ease for issuers that are keen to finance such projects both in Hong Kong and other jurisdictions. Description and scope:
The purchase, financing, leasing, rental and operation of urban and suburban transport vehicles for passengers and road passenger transport include the construction and operation of subways, light railways, tram, and other urban rail transportation facilities; the construction and operation of highcapacity public transportation facilities, such as BRT bus stations, lines and other facilities; the purchase of public transportation vehicles.  The trains and passenger coaches have zero direct (tailpipe) CO2 emissions The criteria thus ensure substantial GHG emissions reductions by increasing the number of zeroemission vehicles and by improving the efficiency of the transport system in general. Construction and operation of personal mobility devices, cycle logistics The promotion of EVs for personal mobility devices, transport devices and the improvement of cycle logistic infrastructure is pivotal to achieve Hong Kong’s Zero Emission Plan for the transport sector by
2050. Considering this activity defines that the propulsion of personal mobility devices should come
from the physical activity of the user, from a zero-emissions motor, or a mix of zero-emissions motor and physical activity, the activity is automatically eligible. This aligns with other international taxonomies wherein the operation of vehicles with zero tailpipe emissions, or close to zero tailpipe emissions, is automatically eligible as it supports the decarbonisation of the transport sector. Furthermore, this activity also includes promotion and use of hydrogen fuel cell electric vehicles. Description and scope:
The activity refers to the selling, purchasing, financing, leasing, renting and operation of personal mobility or transport devices where the propulsion comes from the physical activity of the user, from a zero emissions motor, or a mix of zero-emissions motor and physical activity. This specifically also includes:

The construction of urban walking and cycling transportation systems, including public bicycle
rental sites, non-motorised vehicle parking facilities, road crossing facilities and other slowmoving urban systems.
The construction and operation of shared transportation infrastructure, such as systems for
public rental bicycles, online bicycle rental, online electric bicycle rental, online car rental, car sharing, parking facilities and equipment, and bicycle parking facilities.
The provision of freight transport services by (cargo) bicycles.
The selling, purchasing, financing, leasing, renting and operation of private electric or
hydrogen vehicles.
 Automatically eligible if use of proceeds complies with activity description. Activity cards Construction and operation of public transportation system in urban and rural areas Sector Transportation and Storage Activity Category Land transport including railways Activity Description Purchase, financing, leasing, rental and operation of urban and suburban transport vehicles for passengers and road passenger transport. This includes construction and operation of subways, light railways, tram, and other urban rail transportation facilities; construction and operation of high-capacity public transportation facilities, such as BRT bus stations, lines and other facilities construction and operation; purchase of public transportation vehicles, etc. HSIC Code 491000 492100 492300 492400 492500 CGT Code H1.1. Construction and operation of public transportation system in urban and rural areas Corresponding ISIC Code 4921 4922 Closest EU Taxonomy Code
6.3 Urban and
suburban transport, road passenger transport
Closest Chinese Green Bond
Endorsed Projects
Catalogue Codes
5.5.1.5 Construction and
operation of public transportation system in urban and rural areas HSIC Description 491000: Railway and cable transport 492100: Public bus services 492300: Non-scheduled public light bus services 492400: Scheduled public light bus services 492500: School bus services Criteria and Thresholds Main Criteria The trains and passenger coaches have zero direct (tailpipe) CO2 emissions Additional Requirements and Сomments Additional criteria for projects in the EU:
Other fleets/trains are eligible if direct emissions are below 50 gCO2e/pkm until 2025 (non-eligible thereafter). The threshold of 50 gCO2e/pkm until 2025 ensures that the carbon intensity remains similar to criteria for eligible road vehicles with low occupation factor (50 gCO2/vkm) and significantly lower than emissions for an average car.

20
Construction and operation of personal mobility devices, cycle logistics Sector Transportation and Storage Activity Category Land transport including railways Activity Description Selling, purchasing, financing, leasing, renting and operation of personal mobility or transport devices where the propulsion comes from the physical activity of the user, from a zero emissions motor, or a mix of zero-emissions motor and physical activity. This specifically also includes:

Construction of urban walking and cycling transportation systems,
including public bicycle rental sites, non-motorised vehicle parking facilities, road crossing facilities and other slow-moving urban systems.
Construction and operation of shared transportation infrastructure,
such as systems for public rental bicycles, online bicycle rental, online electric bicycle rental, online car rental, car sharing, parking facilities and equipment, and bicycle parking facilities.
The provision of freight transport services by (cargo) bicycles
Selling, purchasing, financing, leasing, renting and operation of private
electric or hydrogen vehicles
HSIC Code 499000 CGT Code H1.5. Construction and operation of personal mobility devices, cycle logistics Corresponding ISIC Code 4922 Closest EU Taxonomy Code 6.4. Operation of personal mobility devices, cycle logistics Closest Chinese Green Bond Endorsed Projects Catalogue Codes
5.5.1.6 Construction and
operation of facilities for shared transport
5.5.1.4 Construction and
operation of slow mode transportation system
HSIC Description 499000: Other land transport services Criteria and Thresholds Main Criteria Automatically eligible if use of proceeds complies with activity description. Additional Requirements and Сomments
The propulsion of personal mobility devices comes from the physical
activity of the user, from a zero-emissions motor, or a mix of zero-emissions motor and physical activity.
The personal mobility devices are allowed to be operated on the same
public infrastructure as bikes or pedestrians.
Water Transport
Overview
Maritime transport accounts for approximately 80% of global trade by volume, and 70% by value. In 2017, total volumes transported reached 10.7 billion tons. The UN Conference on Trade and Development (UNCTAD) is forecasting a 3.8% compound average growth rate for seaborne trade between 2018 and 2023. Hong Kong is one of the major ports in Asia and has a unique opportunity to facilitate the financing of transport operations and infrastructure. While CO₂ represented almost all of the industry’s GHG emissions (98%), methane (CH₄) emissions from ships have increased recently due to the methane slip associated with increased use and transport of liquefied gas in liquefied natural gas (LNG) carriers and other LNG-propelled ships. There

21 is potential for this trend to continue in the future if there is an increased uptake of LNG-powered ships. However, there is potential for the sector to make significant GHG reductions. These can be achieved through a combination of increasing the energy efficiency of shipping and reducing the GHG intensity of the energy used by ships. According to the International Maritime Organisation (IMO), the shipping industry’s governing body, the sector currently accounts for 2.2% of global emissions. If left unchecked, shipping emissions are expected to grow by 50-250% by 2050. Metrics:
The shipping criteria are designed to apply to wide range of ships, provided that issuers are able to provide either the Energy Efficiency Operation Index (EEOI) or Annual Efficiency Ratio (AER) data of the vessels. Specifically, issuers are required to submit information reported on an annual basis of their achieved EEOI or AER, alongside documentation that the data has been submitted and verified for EU/IMO purposes through the EU MRV or IMO DCS systems. The use of such pre-existing systems also ensures that no additional data collection burden should be required.  AER:

The ratio of a ship's carbon emissions per actual capacity-distance (e.g., dwt x nm sailed).
Assumes ships are fully loaded on all miles travelled during the year. In practice, ships are not always
fully loaded and many ships (e.g., tankers and bulkers) operate with ballast voyages where for several voyages a year they have no cargo.  EEOI:
The total operational emissions to satisfy transport work demanded, this is usually quantified over a
period of time which encompasses multiple voyages (e.g.: a year). The ratio of a ship's carbon emissions per unit of transport work (e.g., cargo x nm sailed).
Considered the ultimate measurement of a ship’s estimated real-world efficiency in that it
incorporates all of the components listed above, emissions when the ship is in port/anchor etc. This is what the EEOI metric is attempting to measure. Criteria and thresholds The utilisation of EEOI and AER metrics and a 2020-2050 declining threshold are derived from the Climate Bonds Initiative Shipping Criteria 10which are in turn based on IMO Secretariat’s Third IMO GHG Study, published in 2014. The Third IMO GHG Study 11contains a dataset estimating the average operational emissions intensities of different ship types and sizes between 2010 and 2012. From this data, the criteria calculate the decarbonisation trajectories for each size and class of ship, adopting a linear threshold to net-zero by 2050. For example, in any given year the AER emissions intensity is =

10 https://www.climatebonds.net/standard/shipping 11 https://www.imo.org/en/ourwork/environment/pages/greenhouse-gas-studies-2014.aspx

At any given year, a ship must be operating at the corresponding emissions intensity for that year. Ships remain compliant provided they are able to operate below the threshold. While the Fourth IMO GHG Study was published in July 2020, the criteria proposed below still reference the Third IMO GHG Study, in line with Climate Bonds. With that in mind, these estimated emissions intensities can be continuously updated as the average emissions of the global fleet changes over time. Activity cards Transportation of freight by sea Sector Transportation and Storage Activity Category Water transport Activity Description Transportation of freight by sea HSIC Code 501302 501402 CGT Code None Corresponding ISIC Code 5012 5022 Closest EU Taxonomy Code
6.10. Sea and coastal freight
water transport, vessels for port operations and auxiliary activities Closest Chinese Green Bond Endorsed Projects Catalogue Codes None HSIC Description 501302:
 Freight transport by own sea-going vessels
 Chartering of own sea-going vessels with crews (i.e. on a full basis) to other operators for freight transport  Renting of own sea-going vessels without crews (i.e. on a bare vessel basis) to other operators for freight transport 501402:
 Operation of sea-going freight vessels rented or chartered from others.
 Re-renting out sea-going freight vessels, which are rented or charted from others to third party operators. Criteria and Thresholds Main Criteria In order to be compliant with the criteria the ship must report an operational emissions intensity (using AER or EEOI) according to the criteria table below. Compliance can be reported by either AER or EEOI. For freight the denominator is tnm (tonne-nautical mile) Type Size (GT) 2020 AER/EEOI 2030 AER/EEOI 2040 AER/EEOI 2050 AER/EEOI Bulk carrier 0-9999 35.1 / 24.6 23.4 / 16.4 11.7 / 8.2 0 10000-34999 12.2 / 6.6 8.1 / 4.4 4.1 / 2.2 0

23
35000-59999 9.2 / 4.6 6.2 / 3.1 3.1 / 1.5 0
60000-99999 8.4 / 3.6 5.6 / 2.4 2.8 / 1.2 0
100000-199999 4.6 / 2.4 3.1 / 1.6 1.5 / 0.8 0
200000-+ 4.1 / 2.3 2.7 / 1.5 1.4 / 0.8 0
Chemical tanker
0-4999 40.3 / 35.4 26.8 / 23.6 13.4 / 11.8 0
5000-9999 26.6 / 19 17.7 / 12.7 8.9 / 6.3 0
10000-19999 18.7 / 11.9 12.5 / 7.9 6.2 / 4 0
20000-+ 12.3 / 6.5 8.2 / 4.3 4.1 / 2.2 0
Container
0-999 27.3 / 16.9 18.2 / 11.3 9.1 / 5.6 0
1000-1999 24.9 / 14.8 16.6 / 9.9 8.3 / 4.9 0
2000-2999 19.5 / 10 13 / 6.7 6.5 / 3.3 0
3000-4999 16.8 / 8.3 11.2 / 5.5 5.6 / 2.8 0
5000-7999 16.2 / 7.8 10.8 / 5.2 5.4 / 2.6 0
8000-11999 14.1 / 6.7 9.4 / 4.5 4.7 / 2.2 0
12000-14500 10.4 / 4.6 6.9 / 3.1 3.5 / 1.5 0
14500-+ 10.4 / 4.6 6.9 / 3.1 3.5 / 1.5 0
General cargo
0-4999 30.2 / 24.2 20.1 / 16.1 10.1 / 8.1 0
5000-9999 27.2 / 16.7 18.2 / 11.1 9.1 / 5.6 0
10000-+ 24.2 / 13.1 16.2 / 8.8 8.1 / 4.4 0
Other liquid tanker 0-+ 106.6/
97.6 71.1 / 65.1 35.5 / 32.5 0
Refrigerated bulk 0-1999 72.8 / 48.7 48.5 / 32.5 24.3 / 16.2 0 Ro-Ro 0-4999 258.2 / 212.4
172.1 /
141.6 86.1 / 70.8 0
5000-+ 63.9 / 45.9 42.6 / 30.6 21.3 / 15.3 0
Vehicle 0-3999 124.7 / 46 83.2 / 30.7 41.6 / 15.3 0 4000-+ 58.1 / 13.8 38.7 / 9.2 19.4 / 4.6 0 Additional Requirements and Comments Excluded assets:
 Crude oil tankers and liquefied gas tankers
 Dry bulk carriers IF transporting more than 20% of fossil fuels annually  Assets used for the exploration or production of fossil fuels (floating production, supply and offloading (FPSO) vessels; subsea, umbilicals, risers, flowlines (SURF) vessels; drilling units; platform supply vessels; well intervention vessels. Additional criteria for projects in the EU: the vessels must have zero direct (tailpipe) CO2 emissions Transportation of passengers by sea Sector Transportation and Storage Activity Category Water transport

24
Activity
Description
Transportation of passengers by sea
HSIC Code 501301
501401
CGT Code None Corresponding
ISIC Code
5011
5011
Closest EU
Taxonomy
Code
6.11. Sea and
coastal passenger water transport
Closest Chinese Green
Bond Endorsed Projects
Catalogue Codes
None
HSIC
Description
501301:

Passenger transport by own sea-going vessels
Chartering of own sea-going vessels with crews (i.e. on a full basis) to other
operators for passenger transport
Renting of own sea-going vessels without crews (i.e. on a bare vessel basis)
to other operators for passenger transport
501401:
Operators of sea-going passenger vessels, rented or chartered from others
Re-renting out sea-going passenger vessels, which are rented or charted
from others to third party operators
Criteria and Thresholds
Main Criteria In order to be compliant with criteria, the ship must report an operational emissions intensity (using AER or EEOI) according to the criteria table below. Compliance can be reported by either AER or EEOI for a specific timeframe. For passenger vessels the denominator is GT-nm (gross tonne- nautical mile). Type Size (GT) 2020 AER / EEOI 2030 AER / EEOI 2040 AER / EEOI 2050 AER / EEOI Ferry-pax only* 0-1999 1272135.8 848090.5 424045.3 0 2000-+ 1740606.6 1160404.4 580202.2 0 Cruise* 0-1999 2044403.4 1362935.6 681467.8 0 2000- 9999 1286641.3 857760.8 428880.4 0 10000- 59999 1495064.7 996709.8 498354.9 0 60000- 99999 1738613.6 1159075.7 579537.9 0 100000-+ 1337274.9 891516.6 445758.3 0 FerryRoPax* 0-1999 822123.9 548082.6 274041.3 0 2000-+ 1137003.8 758002.5 379001.3 0 Additional Requirements and Сomments Additional criteria for projects in the EU: the vessels must have zero direct (tailpipe) CO2 emissions Background Information:
The criteria presented here leverage the guidance in the CGT and also the Climate Bonds Initiative Taxonomy.

25
The criteria for construction of low carbon water infrastructure reference the CGT. These only include the construction of infrastructure that enables low-carbon water transport. The criteria however do not provide any guidance on the operation of low carbon vessels themselves. Thus, to complement this gap, we have provided criteria for the ownership and operation of low carbon vessels for freight and passenger transport. It should also be noted that:
 The criteria for a low carbon vessel are categorised according to the size and class of ship, taking the average emissions for that segment and providing a linear threshold to zero by 2050. According to the Climate Bonds Criteria, vessels must be compliant with the declining threshold in each year of operation. This can be proven through annual reporting. The AER measures carbon emissions associated with transport work, but it uses a ship’s size (deadweight) as a proxy for cargo carried. This does not provide an apples-to-apples comparison between two ships which carry different cargo amounts. Cargo influences the numerator (carbon emissions) because a ship which carries a larger cargo requires more energy for propulsion and the denominator (transport work is a function of cargo carried and distance). Because ships are not typically fully utilised, the AER would overestimate the efficiency of the ship. The IMO’s Data Collection System, will require data to be collected (e.g., fuel consumption, distance sailed and DWT) for all ships 5000 DWT and will enable the calculation of AER. Efficiency metrics (gCO₂/tonne-nm) allow for an apples-to-apples comparison between two vessels whose cargo movements produce different levels of transport work. They also enable the tracking of progress over time and comparison across different shipping fleets, companies, and different modes of transport. The carbon intensity of a ship in real operating conditions is known as the Energy Efficiency Operational Index (EEOI). It is the metric adopted by the IMO and represents the CO₂ emitted per tonne nautical mile for a voyage or specific time period. It can either be calculated from fuel consumption measurements and information on cargo carried and distance travelled or estimated using satellite tracking data and fleet technical specifications. EEOI therefore accounts for the real operating conditions of the vessel and their impact on fuel consumption (e.g., speed, weather, draught). and is therefore a more accurate representation of the CO₂ efficiency than if the efficiency were estimated in the vessel’s designed (or optimal operating) condition as is done by the Energy Efficiency Design Indicator (EEDI) or EVDI. The as-designed efficiency assumes that a ship operates in its designed speed (often above the actual ship speed) in ideal weather conditions and is fully loaded. The EEOI is influenced by speed, utilisation and a ship’s technical efficiency. Increasing the energy efficiency of a ship lowers the EEOI, controlling for all other factors. In practice however, there could be rebound effects as a result of the lower marginal operating cost from the technical efficiency improvement. If the ship is operating on zero emissions fuels, this rebound effect is no longer an issue.

26
Sector: Water supply; sewerage, waste management and remediation activities Sewage sludge treatment Overview More than 93% of the population is served by the public sewerage system, with its sewerage network of about 1900 kilometres and around 300 sewage pumping stations and sewage treatment plants collecting and treating 2.8 million cubic metres of sewage per day 12. On average, the system treats a little over 1 million cubic metres of sewage per year, of which 7.3% undergo preliminary treatment, 73.0% chemically enhanced primary treatment (CEPT), and 19.1% secondary treatments. The remaining 0.6% undergo primary and tertiary treatments 13 . For the purpose of the current phase of development of the taxonomy, the following activities will be assessed:
 Sewage sludge treatment – anaerobic digestion Metrics  Tonnes CH4 per year Methane (CH4) is a much stronger absorber of the emitted thermal infrared radiation in Earth’s atmosphere than carbon dioxide (CO2) and, therefore, in practice, this means that methane is a much more powerful GHG with a warming potential 84-87 times higher than CO2 over the first 20 years after it reaches the atmosphere 14 . As a consequence, even though CO2 has a longer-lasting effect, methane sets the pace for warming in the near term and its current level of estimated anthropogenic emissions correspond to a global temperature increase of over 3 degrees by 2100 15 . Crucially, global methane emissions have increased drastically since 2007 and, in the longer term, their constant increase may be the biggest threat to keeping temperatures below the 2-degree scenario envisioned by the Paris Agreement and to avoid the tipping point towards catastrophic climate change 16 17 .

12 https://www.gov.hk/en/residents/environment/water/sewage/sewagetreatment.htm 13 https://www.dsd.gov.hk/EN/Publicity_and_Publications/Publicity/DSD_Sustainability_Reports/19/overviewof-sewage-treatment.html 14 https://www.iea.org/reports/methane-tracker-2021/methane-and-climate-change 15 https://essd.copernicus.org/articles/12/1561/2020/ 16 https://esd.copernicus.org/articles/12/601/2021/ 17 https://www.ipcc.ch/sr15/chapter/chapter-3/

27
Criteria and thresholds
Sewage sludge treatment – anaerobic digestion
 A monitoring and contingency plan is in place in order to minimise methane leakage at the facility The anaerobic digestion unit converts a certain class of waste into methane. As a consequence, it is essential that the plant has all the necessary safety measures in place to prevent the possibility of its leakage. Therefore, we are proposing a metric in order to monitor the whole lifecycle methane emissions of the plants and to minimise its leakage:
 If anaerobic digestion is used in the facilities which produce power and/or heat: total lifecycle methane emissions should not exceed 1,285g CH4/tonne of waste input The number of 1,285g CH4/tonne of emission is roughly equivalent to 100 gCO2/kWh as calculated by technical expert group that developed Climate Bonds Waste Management Criteria 18. The threshold allows the activity to be compatible with international criteria for green energy generation.  The produced biogas is used directly for the generation of electricity or heat, or upgraded to bio-methane for injection in the natural gas grid, or used as vehicle fuel or as feedstock in chemical industry Biomethane that is produced as the result of anaerobic digestion has many potential negative effects on climate and human health. Leakage risks also include explosion, asphyxiation and poisoning. Therefore, it is very important to utilise it as fast as possible and in a proper way. Activity cards Sewage sludge treatment – anaerobic digestion Sector Water supply; sewerage, waste management and remediation activities Activity Category Sewage sludge treatment Activity Description Construction and operation of facilities for the treatment of sewage sludge by anaerobic digestion with the resulting production and utilisation of biogas or chemicals. Activity Scope Construction and operation HSIC Code 370000 CGT Code E1.1 Sewage sludge treatment – anaerobic digestion Corresponding ISIC Code 3700 Closest EU Taxonomy Code
5.6. Anaerobic
digestion of sewage sludge
Closest Chinese Green Bond
Endorsed Projects Catalogue
Codes
1.5.3.3 Comprehensive
utilisation of sludge from urban sewage treatment plants

18 https://www.climatebonds.net/files/files/Waste%20Management%20Criteria_August2022.pdf

28
HSIC Description Sewage treatment
Criteria and Thresholds
Main Criteria  A monitoring and contingency plan is in place in order to minimise methane leakage at the facility  The produced biogas is used directly for the generation of electricity or heat, or upgraded to bio-methane for injection in the natural gas grid, or used as vehicle fuel or as feedstock in chemical industry  If anaerobic digestion is used in the facilities which produce power and/ or heat: total lifecycle methane emissions should not exceed 1,285g CH4/tonnes of waste input Additional Requirements and Сomments None Waste Collection, Treatment and Recycling Overview Hong Kong is a densely populated area, so the issue of waste management is one of the keys to its sustainable development. Hong Kong generates about 6.4 million tonnes/year of municipal solid waste (MSW), construction and demolition waste, chemical waste, and other special waste (clinical waste, animal carcasses, livestock waste, radioactive waste, grease trap waste, and waterworks/sewage sludge) 19. MSW accounts for 7% of the city’s GHG emissions 20, with the major source being organic waste decomposition in landfills. In 2021, the total quantity of MSW disposed to the landfills was 4.15 million tonnes (69% of the total), which represented an increase of 5.1% as compared to 2020. Applying a discount factor for population growth, the disposal rate of MSW was 1.53 kg/person/day, as compared to 1.44 kg/person/day in 2020 21. The major component of MSW is domestic waste. Its quantity of disposal was 2.55 million tonnes in 2021, which has increased by 2.2% as compared to 2020. On the other hand, the quantity of commercial and industrial (C&I) waste disposed of was 1.59 million tonnes in 2021, which has increased by 10.1% when compared to 2020. The overall MSW recovery rate in 2021 was 31% (1.84 million tonnes), which has increased from 28% in 2020. Of the 11,358 tonnes of MSW landfilled daily in 2021, some 3,437 tonnes (30% of MSW) were food waste, which increased by 5.6 % as compared to 2020. The second largest constituent of MSW was waste plastics. Some 2,331tpd (21% of MSW) were disposed in landfills in 2021, which increased marginally by 0.8 % as compared to 2020. The third largest constituent of MSW was wastepaper, with a disposed quantity of 2,234tpd (20% of MSW) in 2021, which has decreased markedly by 15.5 % as compared to 2020.

19 https://www.sciencedirect.com/science/article/pii/S2772737822000098 20 https://www.scmp.com/comment/letters/article/3167424/why-hong-kongs-landfill-problem-wont-besolved-waste-energy-plants 21 Here and to the end of the third paragraph:
https://www.wastereduction.gov.hk/sites/default/files/msw2021.pdf

29
The quantity of generated (the sum of disposal and reuse) construction waste in 2021 was 53,011tpd (19.35 million tonnes), representing a decrease of 6% as compared with the 2020 level. Among them, the quantity transferred for direct reuse registered an increase of 9% and, since inert materials generated from some large-scale construction projects were directly reused, the amount delivered to public fill reception facilities decreased by 17%. In the past decade, the recovery rate of construction materials has remained at above 90% and was 93% in 2021. Currently, most of the MSW in Hong Kong is disposed of in the following landfills:
 South-East New Territories (SENT)
 West-New Territories (WENT)
 North-East New Territories (NENT)
There are 13 closed landfills in Hong Kong and their restoration works were completed between 1997 and 2006 to minimise their potential adverse impacts to the environment and to render them safe for beneficial use 22 . There are also nine recycling plants in Hong Kong working with different types of wastes. In February 2021, the government adopted a plan called Waste Blueprint for Hong Kong 2035 23, which indicates the priorities for the upcoming decades. According to the plan, the per capita MSW disposal needs go down to 40-45% of the total, while recovery rate must go up to 55% in the medium term. In the long term, the city authorities plan to abandon landfills altogether. For the purpose of the current phase of Hong Kong’s taxonomy development, two activities within this sector will be addressed:
 Collection and transport of non-hazardous waste in source segregated fractions  Utilisation/treatment of domestic waste – anaerobic digestion Metrics  Tonnes CH4 per year Methane is a much stronger absorber of the emitted thermal infrared radiation in Earth’s atmosphere than carbon dioxide (CO2) and, therefore, in practice, this means that methane is a much more powerful GHG with a warming potential 84-87 times higher than CO2 over the first 20 years after it reaches the atmosphere 24. As a consequence, even though CO2 has a longer-lasting effect, methane sets the pace for warming in the near term and its current level of estimated anthropogenic emissions correspond to a global temperature increase of over 3 degrees by 2100 25. Crucially, methane emissions have increased drastically since 2007 and, in the longer term, their constant increase may be the

22 https://www.gov.hk/en/residents/environment/waste/treatment/msw.htm 23 https://www.eeb.gov.hk/sites/default/files/pdf/waste_blueprint_2035_eng.pdf 24 https://www.iea.org/reports/methane-tracker-2021/methane-and-climate-change 25 https://essd.copernicus.org/articles/12/1561/2020/

30 biggest threat to keeping temperatures below the 2-degree scenario envisioned by the Paris Agreement and to avoid the tipping point towards catastrophic climate change 2627 .  % of food and feed crops used as feedstock Excessive utilisation of edible crops and food as a feedstock for producing bioenergy may lead to prices distortion and negatively affect vulnerable populations. Therefore, it is important to limit these kinds of feedstock and give preferences to non-edible types. Criteria and thresholds Collection and transport of non-hazardous waste in source segregated fractions Description and scope: Separate collection and transport of non-hazardous waste in single or comingled fractions aimed at preparing for reuse or recycling.  All separately collected and transported non-hazardous waste that is segregated at source is intended for preparation for reuse or recycling operations Waste that is destined to recycling plants should be collected from segregated sources in order to avoid contamination with non-recyclable waste. More specifically, if contaminated with non-recyclable materials and biowaste, the feedstock might not be able to be used in the recycling plant and, hence, it might need to be landfilled or incinerated.  Bins used to collect waste should be made from 100% of recycled plastic This criterion is intended to promote the recycling of plastics and enhance the overall effect of the activity on the environment. The plastic production chain is one of the most emission-intensive in the world and it puts immense burden on nature. Throughout their lifecycle, plastics have a significant carbon footprint and emit 3.4% 28 of global GHG emissions. Moreover, estimated global plastic leakage to the environment (terrestrial and aquatic) stands at 22-24 Mt per year 29. Using recycled plastics as much as possible helps to prevent this.

26 https://esd.copernicus.org/articles/12/601/2021/ 27 https://www.ipcc.ch/sr15/chapter/chapter-3/ 28 https://sdg.iisd.org/news/global-plastic-outlook-calls-for-more-circularity-nationalroadmaps/#:~:text=The%20build-up%20of%20plastics,GHG)%20emissions%20throughout%20their%20lifecycle 29 https://www.oecd-ilibrary.org/sites/aa1edf33- en/1/3/2/4/index.html?itemId=/content/publication/aa1edf33- en&csp=ca738cf5d4f327be3b6fec4af9ce5d12&itemIGO=oecd&itemContentType=book

31
Utilisation/ treatment of domestic waste –anaerobic digestion Description and scope: Construction and operation of dedicated facilities for the treatment of separately collected bio-waste through anaerobic digestion with the resulting production and utilisation of biogas and digestate and/or chemicals.  A monitoring and contingency plan is in place in order to minimise methane leakage at the facility The anaerobic digestion unit converts a certain class of waste into methane, a dangerous GHG , with a much higher global warming potential than carbon dioxide. It is essential that the plant has all the necessary safety measures in place to prevent the possibility of its leakage.  The produced biogas is used directly for the generation of electricity or heat, or upgraded to bio-methane for injection in the natural gas grid, or used as vehicle fuel or as feedstock in chemical industry Biomethane that is produced as the result of anaerobic digestion has many potential negative effects on the climate and on human health. Leakage risks include explosion, asphyxiation, and poisoning. It is very important to utilise it as fast as possible and in a proper way.  The bio-waste that is used for anaerobic digestion is source segregated and collected separately Bio-waste that is used for anaerobic digestion should be collected from segregated sources in order to avoid contamination of the feedstock. More specifically, if contaminated with plastics, metals and other non-biodegradable materials, the feedstock might not be able to be used in the anaerobic plant and, hence, it might need to be landfilled or incinerated.  The produced digestate is used as fertiliser or soil improver, either directly or after composting or any other treatment. The material that is left after anaerobic digestion is called digestate. It is a wet mixture that is usually separated into solid digestate and liquid digestate. Digestate is rich in nutrients and can be used as fertiliser for crops.  In the dedicated bio-waste treatment plants, the share of food and feed crops used as input feedstock, measured in weight, as an annual average, is less than or equal to 10% of the input feedstock. It is very important that the production of biomethane affects as little as possible the food supply chain as the use of food-quality feedstocks may lead to an increase of food prices in the market.  If anaerobic digestion is used in the facilities which produce power and/or heat: total lifecycle methane emissions should not exceed 1,285g CH4/tonne of waste input.

32
The number of 1,285g CH4/tonne of emission is roughly equivalent to 100 gCO2/kWh as calculated by technical expert group that developed Climate Bonds Waste Criteria 30. The threshold allows the activity to be compatible with international criteria for green energy generation. Methane is a gas that produces a strong greenhouse effect in the atmosphere. It has more than 80 times the warming power of carbon dioxide over the first 20 years after it reaches the atmosphere. Activity cards Collection and transport of non-hazardous waste in source segregated fractions Sector Water supply; sewerage, waste management and remediation activities Activity Category Waste collection, treatment and recycling Activity Description Separate collection and transport of non-hazardous waste in single or commingled fractions aimed at preparing for reuse or recycling HSIC Code 381100 CGT Code E2.1Collection and transport of nonhazardous waste in source segregated fractions Corresponding ISIC Code 3811 Closest EU Taxonomy Code
5.5. Collection
and transport of non-hazardous waste in source segregated fractions Closest Chinese Green Bond Endorsed Projects Catalogue Codes
5.3.1.2 Construction and
operation of garbage treatment facilities
HSIC
Description
Collection of non-hazardous waste
Criteria and Thresholds
Main Criteria  All separately collected and transported non-hazardous waste that is segregated at source is intended for preparation for reuse or recycling operations.  Bins used to collect waste should be made from 100% of recycled plastic Additional Requirements and Comments None

30 https://www.climatebonds.net/files/files/Waste%20Management%20Criteria_August2022.pdf

33
Utilisation/ treatment of domestic waste – anaerobic digestion Sector Water supply; sewerage, waste management and remediation activities Activity Category Waste collection, treatment and recycling Activity Description Construction and operation of dedicated facilities for the treatment of separately collected bio-waste through anaerobic digestion with the resulting production and utilisation of biogas and digestate and/or chemicals. HSIC Code 382100 CGT Code E2.4 Utilisation/ treatment of domestic waste – anaerobic digestion Corresponding ISIC Code 3821 Closest EU Taxonomy Code
5.7 Anaerobic
digestion of bio-waste
Closest Chinese Green
Bond Endorsed Projects
Catalogue Codes
1.5.3.1 Comprehensive
utilisation of urban and rural household waste HSIC Description Treatment and disposal of non-hazardous waste Criteria and Thresholds Main Criteria  A monitoring and contingency plan is in place in order to minimise methane leakage at the facility  The produced biogas is used directly for the generation of electricity or heat or upgraded to bio-methane for injection in the natural gas grid, or used as vehicle fuel or as feedstock in chemical industry  The bio-waste that is used for anaerobic digestion is source segregated and collected separately  The produced digestate is used as fertiliser or soil improver, either directly or after composting or any other treatment  In the dedicated bio-waste treatment plants, the share of food and feed crops used as input feedstock, measured in weight, as an annual average, is less than or equal to 10% of the input feedstock  If anaerobic digestion is used in the facilities which produce power and/ or heat: total lifecycle methane emissions should not exceed 1,285g CH4/tonnes of waste input Additional Requirements and Сomments None

34
Sector: Construction
Construction and renovation of buildings
Overview
Hong Kong’s Climate Action Plan 2050 sets out the vision of "Zero-carbon Emissions Liveable City Sustainable Development", and outlines strategies and targets for combating climate change and achieving carbon neutrality. 31 As part of the Action Plan, the Hong Kong government has set out to reduce the overall electricity consumption of buildings through promoting green buildings, improving buildings' energy efficiency and promoting a low-carbon lifestyle. The goal is to reduce the electricity consumption of commercial buildings by 30 per cent to 40 per cent and that of residential buildings by 20 per cent to 30 per cent from the 2015 level by 2050, and to achieve half of the above targets by
2035. 32

The criteria below are proposed to help building developers, owners, operators and investors to determine whether a building can be considered to be contributing to climate change mitigation. This is done by referencing locally and internationally available building certifications schemes that can serve as proxies which denote whether a building is ‘green’. The criteria presented here are primarily focused on the operational emissions of the building, and do not include the emissions associated with the construction of buildings. As will be explained in the following section, a major challenge for standardising the comparison of buildings’ operational emissions at both the local and international level is the uptake of globally applicable green building certification schemes. Metrics Currently, Hong Kong’s building market typically references BEAM Plus to determine whether a building can be considered ‘green’. 33 However, a commonly cited shortcoming of the BEAM Plus certification is that the broad coverage of the scoring system can potentially shift the focus away from energy performance of buildings. Another problem that is typically encountered when assessing the climate impact of buildings is the availability of universally comparable data. Ideally, information about the energy consumption (including both electricity and gas) of a building is available for use. This could be in the form of Primary Energy Demand (PED) and Energy Usage Intensity (EUI). However, it is often the case, particularly in buildings with multiple tenants, that building owners and operators cannot provide this information without the tenant’s consent. Therefore, in lieu of the data unavailability, the proposed criteria reference the BEAM Plus certification scheme that is widely used in Hong Kong, with an additional focus on the energy use component within the BEAM Plus certification scheme. Applicants under the proposed HK Taxonomy would be required to provide both their overall BEAM Plus rating (which should be at either Gold or Platinum) and show that they meet a minimum energy use threshold, using the BEAM Plus energy use scoring methodology.

31 https://www.info.gov.hk/gia/general/202110/08/P2021100800588.htm 32 https://www.info.gov.hk/gia/general/202110/08/P2021100800588.htm 33 https://www.hkgbc.org.hk/eng/beam-plus/beam-plus-new-buildings/

35
Furthermore, we also suggest that as the Hong Kong prototype taxonomy is developed, it can consider incorporating the Hong Kong Green Building Council’s 34(HKGBC) anticipated Zero-Carbon-Ready Building Certification and Net Zero Building Certification schemes. Metrics for New Buildings Design and operational data are required. Design-level and simulation data should be provided for new construction with a commitment to monitor and report emissions following construction.
1) Operational emissions: Operational emissions encompass all activities related to the use of
buildings, over their life span. This can be further disaggregated into the following measures:
a. Primary Energy Demand: Primary energy is the amount of energy that must be generated originally in order to meet the total energy demand of a building. Decrease of this parameter as well as the source of energy may influence carbon footprints of buildings. b. Energy Consumption: Total energy consumption is defined as the total amount of electricity or equivalent electricity, and gas consumed by the building per annum. Decrease of this parameter as well as the source of energy may influence carbon footprints of buildings.
c. Direct emissions of building: Greenhouse gases emitted from activities under the
industry’s control such as from burning fuel for cement production are direct emissions; those from sources outside of its control including from the electricity it purchases are indirect emissions. This may also include the use of LPG or Towngas (for example use of Towngas in gas boilers). d. Reference can be made to the Product Carbon Accounting Footprint (PCAF) technical guidance for “Accounting and Reporting of GHG Emissions from Real estate Operations”, for further details on the process for conducting an operational emissions assessment.
2) Energy savings: The share of total or relative energy consumption that can be saved because
of the implemented measures.
3) Energy consumption of buildings compared to peers: Energy consumption compared to bestin-class peers. The EMSD provides an online building-based electricity Energy Use intensity
(EUI) Benchmarking Tool 35 and HKGBC also has a Benchmarking and Energy Saving Tool 36 which building owners could use to compare their energy consumption to peers.
4) Buildings Certification Schemes: Many jurisdictions have their own building certification
schemes. For example, BEAM Plus is commonly used in Hong Kong. Other building certification schemes used globally include the US Green Buildings Council (US GBC) Leadership in Energy Efficiency and Design (LEED), 37 and the National Australian Built Environment Rating System (NABERS). 38 The International Finance Corporation (IFC) has also developed a buildings rating system Excellence in Design for Greater Efficiencies (EDGE), 39 that can be easily applied to emerging market contexts. The CGT also outlines the minimum requirements for buildings to be considered green under the EU and Mainland China’s respective building certification schemes (i.e. NZEB and Mainland China’s three-star rating system).
5) Given Hong Kong role as a global financial centre, the proposed buildings criteria are designed
to facilitate the mobilisation of capital for green buildings in Hong Kong and internationally. Therefore, the criteria are designed to recognise that certification of buildings outside of Hong

34 https://www.hkgbc.org.hk/eng/about-us/index.jsp 35 https://eui.emsd.gov.hk/en/EUI_Introduction.html 36 https://hkbest.hkgbc.org.hk/ 37 https://www.usgbc.org/leed 38 https://www.nabers.gov.au/ 39 https://edgebuildings.com/

36
Kong, provided that they meet certain thresholds under those international building certification schemes.
6) Zero-Carbon-Ready Building Certification & Net Zero Building Certification: We are aware
that the HKGBC is in the process of developing a new building certification scheme which is primarily focused on the emissions performance of buildings in Hong Kong. We anticipate that this upcoming scheme will help to plug the gaps in Hong Kong’s existing certification systems and look forward to incorporating this work in the near future, when the scheme becomes available for public use. a. The Zero-Carbon-Ready Building Certification scheme is an energy performance certification whereby buildings will be certified according to their rating of building energy efficiency. It includes a Target Setting Certification, whereby buildings are awarded a certification if a target to zero-carbon-ready building requirements is set, and a Progress Certification rewarded when the reduction target is achieved. b. The Net Zero Building Certification is awarded if the annual on-site renewable energy generation is equal, or more than the annual energy consumption of the building. Note: Items 1 to 3 in the above list of Metrics for New Buildings are the most ideal metrics, however, this data may not be adequately available across the buildings sector. As such, as an interim measure, it is recommended that item 4 (BEAM Plus) is recommended for use in the short term, with the eventual adoption of item 5 (Zero-Carbon-Ready Building Certification & Net Zero Building Certification) when this is made available by the HKGBC. Metrics for Renovations
1) Primary Energy Demand: Primary energy is the amount of energy that must be generated
originally in order to meet the total energy demand of a building. Decrease of this parameter as well as the source of energy may influence carbon footprints of buildings.
2) Energy Consumption: Total energy consumption is defined as the total amount of electricity
or equivalent electricity and the total amount of gas consumed by the building per annum. Decrease of this parameter as well as the source of energy may influence carbon footprints of buildings.
3) Direct emissions of building: Greenhouse gases emitted from activities under the industry’s
control such as from burning fuel for cement production are direct emissions; those from sources outside of its control including from the electricity it purchases are indirect emissions. Criteria and alignment The proposed taxonomy criteria for the certification of buildings in Hong Kong is currently cover four separate economic activities, construction of new commercial buildings, construction of residential buildings, renovation of commercial buildings and renovation of residential buildings. The criteria for construction of new commercial buildings and construction of new residential buildings are proposed to cover buildings that may be constructed in Hong Kong, but also buildings that are constructed outside of Hong Kong. It is important to note that the criteria for construction of new commercial buildings in Hong Kong references the existing BEAM Plus certification scheme, but also paves the way for referencing the anticipated Zero-Carbon-Ready Building Certification Scheme developed by the HKGBC. 40

We suggest that the criteria for construction of new residential buildings should be updated in the future to reflect developments in the green building certification schemes offered by the HKGBC.

40 The scheme is anticipated to be launched in H2 2023.

37
For the construction of new commercial buildings in Hong Kong:
1) Buildings must be BEAM Plus certified (to either gold or above) or designed to certify as such,
and the Energy Use component of applicant’s BEAM Plus Certification must meet at least a minimum of 10 credits under EU2 (Reduction of CO2 Emissions) and a minimum of 70% in Energy Use category and, either:
a. For projects certified under BEAM Plus 1.2: 30% energy saving against the BEC 2018 baseline, or b. For projects certified under BEAM Plus 2.0, 20% energy saving against BEC 2021 baseline.
2) Or buildings certified at least Extra Low in Energy Usage Intensity (EUI) or level 2 improvement (i.e.
25% reduction) in Energy Performance Certification under the upcoming Zero-Carbon-Ready Building Certification Scheme,
3) Or buildings have achieved either Net Zero Energy Building Certification or Net-Zero Operational
Carbon Building Certification.
For the construction of new residential buildings in Hong Kong:
1) Buildings must be BEAM Plus certified (to either gold or above) or designed to certify as such,
and the Energy Use component of applicant’s BEAM Plus Certification must meet at least a minimum of 10 credits under EU2 (Reduction of CO2 Emissions) and a minimum of 70% in Energy Use category and, either:
a. For projects certified under BEAM Plus 1.2: 30% energy saving against the BEC 2018 baseline, or b. For projects certified under BEAM Plus 2.0, 20% energy saving against BEC 2021 baseline.
2) Or buildings certified at least Extra Low in Energy Usage Intensity (EUI) or level 2 improvement
(i.e. 25% reduction) in Energy Performance Certification under the upcoming Zero-CarbonReady Building Certification Scheme,
3) Or buildings have achieved either Net Zero Energy Building Certification or Net-Zero
Operational Carbon Building Certification.
For the construction of new commercial and residential buildings outside Hong Kong:
1) For buildings in the European Union: Primary Energy Demand (PED), defining the energy
performance of the building resulting from the construction, is at least 10 % lower than the threshold set for the Nearly Zero-Energy Building (NZEB) 41requirements in national measures implementing Directive 2010/31/EU of the European Parliament and of the Council. The energy performance is certified using an as built Energy Performance Certificate (EPC).
2) For buildings in Mainland China:
a. Projects should be rated to the third-level of the Evaluation Standard (operational) for Green Building 42 Three Star System, and b. For buildings larger than 5000m2, upon completion, the building resulting from the construction undergoes testing for air-tightness and thermal integrity, and any deviation in the levels of performance set at the design stage or defects in the building envelope are disclosed to investors and clients.
3) For buildings in other markets:

41 https://energy.ec.europa.eu/topics/energy-efficiency/energy-efficient-buildings/nearly-zero-energybuildings_en 42 https://www.gbig.org/collections/14970

38 a. Certified under Leadership in Energy and Environmental Design (LEED) 43 to Gold level and b. Minimum score of 9 points under Energy Assessment Credits and
c. Optimize Energy Performance for 30% improvement above ASHRAE 90.1 44 in energy
performance
4) Certification under NABERS 45 of at least five stars
5) Certification under IFC-EDGE 46
For the renovation of commercial buildings:
The building renovation leads to a reduction of primary energy demand (PED), energy consumption, or direct GHG emissions of at least 30% against the building’s historic average. For the renovation of residential buildings:
The building renovation leads to a reduction of primary energy demand (PED), energy consumption, or direct GHG emissions of at least 30% against the building’s historic average. Questions and outstanding issues  Criteria provided for construction of new buildings in the CGT are not directly usable in the Hong Kong context due to the reference to policies and standards unavailable in Hong Kong.  Due to the limited availability of data regarding the energy usage of residential units in Hong Kong, we are unable to provide an accurate benchmark for performance improvement. However, in the long run, having a data-based set of criteria (which consist of emissionsrelevant metrics and thresholds) will be the most ideal way to monitor and manage buildingsrelated emissions. This could be done by taking the average emissions intensity performance of the top 30% of buildings in the selected locations (the baseline) and drawing a straight line to hit net-zero carbon by 2050. 47  The HKGBC anticipated launch of a Zero Carbon Ready Building scheme can help to improve the focus of climate change mitigation criteria for buildings in Hong Kong, and we recommend that this can be incorporated into the Taxonomy when it becomes available.  The current proposed levels of emissions reductions against baselines are based on the improvement performance of buildings that would have achieved a BEAM Plus Gold standard, i.e. buildings that have achieved a BEAM Plus Gold Certification will generally meet the emissions intensity threshold, but this is not categorically true. Thus, it is important that additional information on the energy and emissions performance of the building is provided.  We recognise that the proposed criteria do not include all of the existing labelling codes and standards globally. As a ‘live’ document, it is intended that other proxies may be incorporated

43 https://www.usgbc.org/
44 https://www.ashrae.org/technical-resources/standards-and-guidelines 45 https://www.nabers.gov.au/ 46 https://edgebuildings.com/ 47 This would be aligned with the Climate Bonds Initiative’s approach to developing a globally applicable standard for buildings.

39 in future, provided they can demonstrate that it reflects building emissions performance in line with the emissions performance trajectory. Activity cards Renovation of existing buildings Sector Construction Activity Scope Construction and renovation of buildings Activity Description Renovation of existing buildings HSIC Code 419100 439101 439102 4321XX 4322XX 4329XX 4399XX CGT Code F1.2 Renovation of existing buildings Corresponding ISIC Code 4100 4321 4322 4329 4300 4390 HSIC Description 419100 - structural alteration at erected buildings and structures 439101 - Interior fitting, decoration and repairs for buildings 439102 - Exterior renovation and repairs for buildings 4321XX - Electrical equipment installation and maintenance 4322XX - Ventilation, gas and water fitting installation and maintenance activities 4329XX - Other construction installation and maintenance 4399XX: Other general finishing and specialised construction works Criteria and Thresholds Main Criteria For the renovation of existing commercial buildings:
The building renovation leads to a reduction of primary energy demand (PED), energy consumption, or direct GHG emissions of at least 30% against the building’s historic average. Use HKGBC’s upcoming Zero-Carbon-Ready Building and Net Zero Building Certifications when they become available:
1) Must be at least Extra Low or Level 2 improvement (i.e. 25%
reduction) according to Zero-Carbon-ready building Certification Scheme OR
2) Must have either:
a. Net Zero Energy Building Certification or Net-Zero Operational Carbon Building Certification, and either
i. Energy Performance Certification or
ii. Target setting Certification and Progress Certification
For the renovation of existing residential buildings:
The building renovation leads to a reduction of primary energy demand (PED), energy consumption, or direct GHG emissions of at least 30% against the building’s historic average. Proving the absolute performance improvement of 30% with disclosure of data.

40
Improvement of at least 30% based on verified consumption data.
Additional
Requirements and
Сomments
For the renovation of existing residential buildings:
We expect that at this stage, the upcoming Zero-Carbon-Ready Building Certification & Net Zero Building Certification will only be available for commercial properties. Based on the work of the Hong Kong Green Buildings Council, a Beam Plus Residential/Interiors Proxy might become available in the H2 of 2023. We will update this set of criteria once the proxy has been finalised. Construction of new buildings Sector Construction Activity Scope Construction and renovation of buildings Activity Description Construction of new buildings HSIC Code 411000 412000 419100 439101 4321XX 4322XX 4329XX 4399XX CGT Code F1.1 Construction of new buildings Corresponding ISIC Code 4100 4321 4322 4329 4330 4390 HSIC Description 411000 - Erection of architectural superstructures 412000 - Structural steel framework erection 419100 - Structural alteration at erected buildings and structures 439101 - Interior fitting, decoration and repairs for buildings 4321XX - Electrical equipment installation and maintenance 4322XX - Ventilation, gas and water fitting installation and maintenance activities 4329XX - Other construction installation and maintenance 4399XX: Other general finishing and specialised construction works Criteria and Thresholds Main Criteria For the construction of new commercial buildings in Hong Kong:
1) Buildings must be BEAM Plus certified (to either gold or above) or
designed to certify as such, and the Energy Use component of applicant’s BEAM Plus Certification must meet at least a minimum of 10 credits under EU2 (Reduction of CO2 Emissions) and a minimum of 70% in Energy Use category and, either:
a. For projects certified under BEAM Plus 1.2: 30% energy saving against the BEC 2018 baseline, or b. For projects certified under BEAM Plus 2.0, 20% energy saving against BEC 2021 baseline.
2) Or buildings certified at least Extra Low in Energy Usage Intensity (EUI) or
level 2 improvement (i.e. 25% reduction) in Energy Performance Certification under the upcoming Zero-Carbon-Ready Building Certification Scheme,
3) Or buildings have achieved either Net Zero Energy Building Certification or
Net-Zero Operational Carbon Building Certification.

41
For the construction of new residential buildings in Hong Kong:
1) Buildings must be BEAM Plus certified (to either gold or above) or
designed to certify as such, and the Energy Use component of applicant’s BEAM Plus Certification must meet at least a minimum of 10 credits under EU2 (Reduction of CO2 Emissions) and a minimum of 70% in Energy Use category and, either:
a. For projects certified under BEAM Plus 1.2: 30% energy saving against the BEC 2018 baseline, or b. For projects certified under BEAM Plus 2.0, 20% energy saving against BEC 2021 baseline.
2) Or buildings certified at least Extra Low in Energy Usage Intensity (EUI)
or level 2 improvement (i.e. 25% reduction) in Energy Performance Certification under the upcoming Zero-Carbon-Ready Building Certification Scheme,
3) Or buildings have achieved either Net Zero Energy Building
Certification or Net-Zero Operational Carbon Building Certification.
For the construction of new commercial and residential buildings outside Hong Kong:
1) For Projects in the European Union: Primary Energy Demand (PED),
defining the energy performance of the building resulting from the construction, is at least 10 % lower than the threshold set for the Nearly Zero-Energy Building (NZEB) requirements in national measures implementing Directive 2010/31/EU of the European Parliament and of the Council. The energy performance is certified using an as built Energy Performance Certificate (EPC).
2) For buildings in Mainland China:
a. Projects should be rated to the third-level of Mainland China’s Three Star System, and b. For buildings larger than 5000m2, upon completion, the building resulting from the construction undergoes testing for air-tightness and thermal integrity, and any deviation in the levels of performance set at the design stage or defects in the building envelope are disclosed to investors and clients.
3) For buildings certified under Leadership in Energy and Environmental
Design (LEED):
a. Gold Certification is required and b. Minimum score of 9 points under Energy Assessment Credits and
c. Optimize Energy Performance for 30% improvement above
ASHRAE 90.1 in energy performance
4) Certification under NABERS of at least 5-stars, or
5) Certification under any grade for IFC-EDGE
Additional
Requirements and
Сomments
For the construction of new residential buildings:
The criteria for construction of new residential buildings outside Hong Kong reference international best practices. However, the criteria proposed for the construction of new residential buildings within Hong Kong are designed as a proposal. This is because in Hong Kong there is a relatively limited pool of data available for which a

42 baseline can be constructed. For example, there is no BEC baseline against which a reduction target can be set. Furthermore, to our knowledge, we do not expect that at this stage, the forthcoming HKGBC zero-carbon buildings scheme will be applicable for residential buildings. Background Information:
Hong Kong uses BEAM Plus, a green building rating system (GBRS) to assess and recognise buildings which meet certain green requirements or standards. BEAM Plus is recognised and certified by the Hong Kong Green Buildings Council. As of May 2020, there were 929 buildings within Hong Kong that had been certified by BEAM Plus. BEAM Plus defines a comprehensive set of performance criteria covering a range of sustainability issues relating to the planning, design, construction, commissioning, management, operation and maintenance of buildings. However, one limitation of scoring-based rating systems such as BEAM Plus is that they do not solely focus on the climate-performance of buildings. This is because BEAM Plus covers multiple aspects of a building (beyond climate change mitigation) including water, waste, material, site and transport, indoor environments, building management and more. Although energy is always one critical aspect of the BEAM Plus assessment process, and green buildings generally have better energy performance than non-green buildings, the overall multi-aspect assessment does not solely measure the goal of decarbonisation (i.e. to lower energy use during the construction and operation stages of a building project). In some situations, it is possible for a building to receive a gold or platinum rating while under-performing on the energy intensity and use factors. This shortcoming can impede the interoperability of BEAM Plus with the focus of the criteria outlined in the CGT, EU and Mainland China taxonomies. Therefore, as can be seen in the criteria above, in order to balance the accuracy of the proposed taxonomy criteria with usability and practicality, we use both the overall BEAM Plus performance level, but also ask for an additional set of climate and energy-related criteria. More information comparing the green building rating systems of different markets can be found here:
https://www.hkgreenfinance.org/wp-content/uploads/2020/12/Green-Building-Rating-SystemsEnergy-Benchmarking-Study.pdf For reference, the construction of new buildings criteria in the CGT is outlined below:
A variety of technical measures is applied to greatly reduce the energy demand for heating, air conditioning and lighting in such buildings, maximizing the energy efficiency of energy-consuming equipment and systems, making full use of renewable energy sources, and providing comfortable indoor environment with minimum energy consumption. Constructions of new buildings for which:
1) The Primary Energy Demand (PED)*, defining the energy performance of the building resulting
from the construction, is at least 10 % lower than the threshold set for the nearly zero-energy

43 building (NZEB) requirements in national measures implementing Directive 2010/31/EU of the European Parliament and of the Council. The energy performance is certified using an as built Energy Performance Certificate (EPC).
2) For buildings larger than 5000 m2*, upon completion, the building resulting from the
construction undergoes testing for air-tightness and thermal integrity, and any deviation in the levels of performance set at the design stage or defects in the building envelope are disclosed to investors and clients. As an alternative; where robust and traceable quality control processes are in place during the construction process this is acceptable as an alternative to thermal integrity testing.

The calculated amount of energy for a building expressed by a numeric indicator of total primary
energy use in kWh/m2 per year and based on the relevant national calculation methodology and as displayed on the Energy Performance Certificate (EPC). Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the energy performance of buildings (OJ L 153, 18.6.2010, p. 13).
For residential buildings, the testing is made for a representative set of dwelling/apartment types.
The testing is carried out in accordance with EN13187 (Thermal Performance of Buildings - Qualitative Detection of Thermal Irregularities in Building Envelopes - Infrared Method) and EN 13829 (Thermal performance of buildings - Determination of air permeability of buildings - Fan pressurization method) or equivalent standards accepted by the respective building control body where the building is located.

1
Discussion Paper
Prototype of a Green
Classification Framework for Hong Kong

Supported by
30 May 2023

2
Table of Content
Introduction .................................................................................................................................................. 3
Potential benefits brought about by a taxonomy ........................................................................................ 4
Taxonomy development in Hong Kong ........................................................................................................ 6
Design and structure of the prototype ......................................................................................................... 7
Key reference taxonomies ........................................................................................................................ 7
Core principles .......................................................................................................................................... 8
Layering and Decision Tree ....................................................................................................................... 9
Activities and thresholds ........................................................................................................................ 11
Prototype spreadsheet ........................................................................................................................... 12
Sectoral activity cards ............................................................................................................................. 13
Alignment of the Prototype Taxonomy .................................................................................................. 15
Next steps ................................................................................................................................................... 16
Questions for discussion ............................................................................................................................. 17
List of references ........................................................................................................................................ 18
List of figures
Figure 1. Possible venues for using a taxonomy ............................................................................................... 6
Figure 2. Taxonomy layers scheme ................................................................................................................. 10
Figure 3. Taxonomy criteria decision tree ....................................................................................................... 10
Figure 4. Activity card parts and description ................................................................................................... 13
Figure 5. Taxonomy compatibility table .......................................................................................................... 15

3
Introduction
Climate change is one of the most pressing issues facing the world today. Its impact on the planet can be felt in the form of rising temperatures, melting glaciers, rising sea levels, and more frequent natural disasters. The continued burning of fossil fuels and other human activities are causing greenhouse gas (GHG) emissions, which are trapping heat in the atmosphere and accelerating the process. Asia is one of the most vulnerable hotspots to climate change as the region is experiencing changes in rainfall patterns, rising sea levels, and more frequent extreme weather events, such as typhoons and floods. These events can lead to crop failures, water scarcity, and infrastructure damage, which can have a significant impact on the region's economies. Moreover, the low-lying landscape also makes this region particularly vulnerable to rising sea levels. Hong Kong is no exception and is similarly affected by the impact of climate change. Temperature increased at a rate of 0.28℃ per decade during 1993-2022 i whilst, on average, the mean sea level at Victoria Harbour rose at a rate of 32 millimetres per decade during 1954-2022 ii. In addition, in recent years the jurisdiction is experiencing more frequent and intense weather events, such as typhoons and heavy rainfalls. These events disrupt the city's transportation and communication networks, affecting its economy and the well-being of its citizens. In an effort to combat climate change, 196 Parties at the United Nations Climate Change Conference adopted the Paris Agreement in 2015 iii. The Agreement sets ambitious targets for limiting global warming to well below 2℃ above pre-industrial levels and pursues efforts to limit the temperature increase to 1.5℃. The Agreement also calls upon its signatories “to cooperate with the private sector, civil society, financial institutions, cities and regions in order to mobilise stronger and more ambitious climate actions in the world iv”. As part of China, the Hong Kong Special Administrative Region has the duty to make its contribution in order to achieve the goals of the Paris Agreement. In 2021, the Government announced “Hong Kong's Climate Action Plan 2050”, which set out four major decarbonisation strategies to allow it to achieve carbon neutrality before 2050: the “net-zero electricity generation”, “energy saving and green buildings”, “green transport” and “waste reduction”. To support the global action on climate change, the financial sector has a key role to play. It can green the world by directing capital flows towards sustainable investments and away from highemitting industries, hence driving the transition to a sustainable future. In this regard, a green taxonomy is an important tool as it provides a standardised framework for classifying and labelling financial products and investments based on their environmental sustainability. This classification system allows investors to identify and invest in activities that are making a positive impact on
the environment while avoiding those that have a negative impact. It helps to align investment decisions with climate goals and reduce the risk of investing in assets that are not aligned with a low-carbon future. It can also help unlock new investment opportunities for green technologies and sustainable projects and increase transparency and accountability in the financial sector. Given the critical role a green taxonomy can play in shaping green financial markets, the Hong Kong Monetary Authority (HKMA) has commissioned Climate Bonds Initiative (Climate Bonds) to work on a green classification framework for adoption in the local market. This will help underpin Hong Kong’s instrumental role in bridging green financial flows between the Mainland and the rest of the world, and hence strengthening Hong Kong’s status as an international green finance hub. This paper outlines the structure and core elements of our proposed prototype framework and provides the basis for a consultation to gather feedback from market stakeholders on how to improve the prototype. Please submit your feedback in relation to this paper, if any, on or before 30 June 2023 to hongkong.consultations@climatebonds.net.

4
Potential benefits brought about by a taxonomy Taxonomies promote sustainable investments that meet robust sustainability goals, increase transparency and measurability on sustainability objectives, and help direct capital flows to achieve environmental, social and governance benefits and net-zero emission targets. Apart from financial market participants and their customers, different stakeholders could also benefit from making use of a green taxonomy.  For investors, a taxonomy provides clear and standardised information about their investments, reducing information asymmetry and allowing for better decision-making. It also helps to mitigate the risks associated with climate change and promote long-term sustainable investments.  For issuers of green bonds, a taxonomy provides credibility and legitimacy, making it easier to attract green investments.  Regulators can also benefit from a green finance taxonomy, as it can help ensure compliance with environmental regulations and provide a basis for measuring progress towards sustainability goals.  Finally, for society, a green finance taxonomy can support the transition towards a low-carbon and sustainable economy, fostering economic growth and job creation while reducing environmental impact. More specifically, a taxonomy is a multipurpose tool that can be used for a variety of objectives. These include:
 To steer the market and provide guidance, frameworks and standards for all stakeholders including issuers and investors. It helps to avoid greenwashing and to increase capital flows to green projects as more stakeholders and institutions strengthen their efforts on sustainability. It can also be used to provide better clarity when complying with other frameworks such as the Taskforce on ClimateRelated Financial Disclosures (TCFD) v Recommendations.  To attract international climate-oriented capital. A local taxonomy which is interoperable with international standards and other recognised taxonomies can increase investment flows into the domestic market and facilitate domestic borrowers operating on global markets.  To enable and harmonise data disclosure. As the taxonomy is adopted by financial institutions, it will become possible to benchmark the share of green investments and assets in their portfolios.  To assess environmental risks and risk mitigation options. Compliance with the taxonomy criteria can provide valuable information on climate-related risks for risk assessment specialists within the financial sector.  To support climate goals. A taxonomy provides governments with a tool to define target activities and develop support policies to achieve a jurisdiction’s emissions reductions targets in line with the goals of the Paris Agreement.

5
The World of Green Taxonomies
In 2012, the Climate Bonds Initiative developed a green taxonomy as a voluntary guideline for the green bond market. Since then, it has evolved from a market-led tool to one that is increasingly led by governments. Currently, over 20 jurisdictions have established or are in the process of establishing a green or sustainable finance taxonomy or similar classification schemes, including Mainland China, the European Union (EU), the Association of Southeast Asian Nations (ASEAN), Russia, Colombia, and South Africa. Source: Climate Bonds Initiative A key feature of taxonomies is the criteria used to identify green activities and to separate them from non-green activities. Globally, there are three different methods used to define green:

Whitelist-based taxonomies, which identify compliant projects or economic activities under
each sector or sub-sector (Mainland China, Russia, Mongolia)
Technical screening criteria-based taxonomies, which define quantitative thresholds and
screening criteria for economic activities and their compliance with specific environmental objectives such as climate change mitigation or adaptation and resilience (EU, Colombia, South Africa)
Principle-based taxonomies define a set of core overarching principles for the market
without specifying compliant activities or thresholds (Japan, Malaysia, ICMA) The EU Taxonomy as well as the Climate Bonds Initiative Taxonomy are using technical screening criteria, while the China Green Bond Endorsed Projects Catalogue is whitelist-based with some inclusions of specific thresholds. However, as taxonomies multiply around the world, concerns of market fragmentation arise as discrepancies between them may confuse investors and discourage cross-border capital flows. Consequently, efforts are being made to harmonise compliant assets and metrics covered by different taxonomies across jurisdictions. An example is the development of the Common Ground Taxonomy (CGT) by the International Platform on Sustainable Finance (IPSF).

6
Figure 1. Possible venues for using a taxonomy
Source: Climate Bonds Initiative
As an international finance centre, Hong Kong would gain unique benefits from a taxonomy:
 Firstly, Hong Kong will be the first market to operationalise the CGT, which was jointly developed by the authorities of Mainland China and the EU under the IPSF to identify commonalities between their taxonomies. Through operationalising the CGT, Hong Kong could strengthen its position as a hub and contribute positively to the growing need for interoperability among standards within the green finance space. An operationalised CGT would also provide international issuers and investors with a tool for reporting and communicating sustainability impacts that could help them meet the regulatory and investor needs they face across global markets.  Secondly, a credible and scientifically robust taxonomy would help Hong Kong underpin its ambitions to capitalise on the opportunities presented by the Mainland to develop into a green finance centre in the Guangdong-Hong Kong-Macao Greater Bay Area.  Lastly, a locally tailored green taxonomy would support Hong Kong to achieve its goals of carbon neutrality before 2050. Taxonomy development in Hong Kong Green and sustainable finance is a focus area of work for Hong Kong. One of the key action items of the Green and Sustainable Finance Cross-Agency Steering Group (CASG) 1 is to adopt a taxonomy for use across financial

1
Established in May 2020, the CASG is co-chaired by the HKMA and the Securities and Futures Commission (SFC). Members include the Environment and Ecology Bureau, Financial Services and the Treasury Bureau, Hong Kong Exchanges and Clearing Limited, Insurance Authority and the Mandatory Provident Fund Schemes Authority. The CASG aims to co-ordinate the management of climate and environmental risks to the financial sector, accelerate the growth of green and sustainable finance in Hong Kong and support the Government’s climate strategies.

7 sectors in Hong Kong. Following the publication of the CGT by the IPSF 2 , the CASG, with the aim of aligning with the CGT, has been exploring the development of a green classification framework for adoption in the local market which facilitates easy navigation among the CGT, Mainland China’s and EU’s taxonomies. The framework is planned to be developed in phases. In the current phase, it is intended that a prototype will be developed. The prototype will contain a limited number of sectors, activities and additional operational tools. Its main objective is to work out the internal structure, core elements and key mechanisms for gathering feedback from local and international stakeholders. This feedback will be further processed and integrated as much as possible into the prototype taxonomy. In this regard, the HKMA has commissioned Climate Bonds to assist in the development of the prototype. As the CGT is not a single taxonomy or international standard and some of the criteria in the Mainland China and EU taxonomies are only usable within their respective jurisdictions, one of the main challenges during this exercise has been to maintain interoperability by formulating a set of economic-activity level criteria which match the ambition of those criteria outlined in the CGT, Mainland China and EU’s taxonomies. Another challenge is about the introduction of appropriate adaptations to consider local circumstances and standards commonly adopted by the industry, so that the framework can be applicable and operable in the financial sectors in Hong Kong, while at the same time, ensuring that the overarching criteria outlined in each activity can be applied to international investments and maintain scientific rigour for the setting of decarbonisation pathways. Design and structure of the prototype Key reference taxonomies The major taxonomy referenced in developing the prototype is the CGT vi. It was developed by the IPSF vii as a bridge between the Mainland China and the EU taxonomies. In July 2020, the EU and the Mainland China convened a Working Group with the objective to undertake a comprehensive assessment of existing taxonomies for environmentally sustainable investments, including identifying the commonalities and differences in their respective approaches and outcomes. The CGT is designed to be flexible and adaptable to different contexts, allowing different jurisdictions to tailor it to their specific needs while ensuring a common approach to sustainable finance. It is intended to serve as a reference point for financial institutions, investors, and policymakers in the development and implementation of sustainable finance initiatives that would be acceptable across different jurisdictions. The EU Taxonomy is another benchmark that is widely accepted as the basis for constructing national taxonomical systems. It consists of advanced technical screening criteria and activity thresholds as well as extensive set of supplementary documents related
to the issuance of financial instruments, disclosures, sectoral operational principles etc. Although many of the requirements of the taxonomy include references to specific EU laws and regulations, many other taxonomies use it as a reference point. It is also at the centre of the IPSF efforts to build the CGT. The EU Taxonomy contains a well-developed set of additional Do No Significant Harm (DNSH) and Minimum Social Safeguards (MSS) criteria that are also used as a basis for many other developments. In Mainland China, regulators responsible for the green bond market jointly released the Green Bond Endorsed Projects Catalogue for consultation in May 2020, which marked the beginning of the harmonisation of domestic green finance definitions viii. Unlike the EU Taxonomy, it is a whitelist-based taxonomy that, in most cases, does not have specific thresholds, but it defines assets and activities that are considered green. The Mainland China Taxonomy (just as the EU one) contains a lot of references to domestic

2
In November 2021, the IPSF published the CGT Instruction Report and consulted stakeholders on the CGT activities’
table. In June 2022, the IPSF published the updated version of both documents.

8 law, which makes it difficult to apply outside Mainland China. The 2021 version of the Catalogue is used as a reference and referred to as Mainland China Taxonomy in this document. ASEAN Taxonomy is still a work in progress, but its second version with the first batch of criteria was published in March 2023 ix. This is a multilayer “traffic lights system” taxonomy which allows different ASEAN states to choose different decarbonisation criteria baselines depending on their economic capabilities. The baseline should be subsequently updated as the market grows and becomes more developed. The taxonomy currently covers only one environmental objective (mitigation) and only one sector (energy generation), but it is expected that in the future it will cover other sectors and objectives. The Climate Bonds Taxonomy (CBT) is the oldest and one of the most developed taxonomies used as a reference for the prototype. At the heart of the CBT lies a suite of sector-specific eligibility criteria. The sector criteria set climate change benchmarks for that sector that are used to screen assets and capital projects. They are determined through a multi-stakeholder engagement process, including Technical and Industry Working Groups, convened and managed by Climate Bonds, and are subject to public consultation and revised as needed as a result of that feedback. Finally, they are reviewed and approved by the Climate Bonds Standard Board. Core principles Our taxonomy is intended to provide financial sectors professionals with consistent and internationally recognised definition of “green” and “environmentally sustainable” (collectively referred to as “green” hereafter) economic activities. It will be guided by scientific principles and be interoperable, comparable and inclusive of other green definitions globally. More specifically, it will be based on the following core principles that ensure its credibility, scientific approach, and alignment with all important benchmarks:
1) Alignment with the Paris Agreement. The proposed Hong Kong Taxonomy is primarily focused on
providing clear definitions regarding the emissions intensity performance required of economic activities in order to keep global warming well below 2℃, ideally aiming for 1.5℃. The criteria represent the maximum GHG-emissions intensity an economic activity can have to avoid breaching the remaining carbon budget. As a consequence, at this stage, climate change mitigation is the central environmental objective of the taxonomy.
2) A proof from greenwashing. By synthesising existing taxonomies’ best practices into an easy-to-use
set of criteria, the Hong Kong Taxonomy’s goal is to provide more clarity about what can be considered ‘green’, and to ensure that claims of meeting this definition can be verified accordingly.
3) Interoperability with other taxonomies. The proposed Hong Kong Taxonomy prototype considers
significant sustainable finance taxonomy developments that have occurred in other jurisdictions, particularly the Mainland China, the EU and the ASEAN. It is also designed to be compatible with the CBT. This was accomplished by categorising activities in accordance with the International Standard Industrial Classification of All Economic Activities (ISIC) and Hong Kong Standard Industrial Classification (HSIC) codes, and as far as possible, using universally applicable metrics.
4) Science-based criteria and thresholds. The thresholds reflect the ambition required to meet global
decarbonisation objectives. In many instances, the thresholds follow a trajectory that aligns with the overall need to transition the global economy to net-zero emissions by 2050.
5) Foundations of Do No Significant Harm and Social Safeguards. While the focus of the proposed Hong
Kong Taxonomy is on climate change mitigation, it is also recognised that sustainability issues are inextricably linked. To acknowledge the importance other environmental objectives such as climate change adaptation, biodiversity, water use, pollution and circular economy, as well as wider sustainable development goals, the proposed Hong Kong Taxonomy will outline the foundations for DNSH and MSS.

9
Layering and Decision Tree
Layering
The Hong Kong Taxonomy is proposed to have three layers of depth to provide green definitions of different degrees of preciseness, taking into account complexity of the activities and applicability in the Hong Kong circumstances. Layer 1. The first layer is intended to map activities to standardised industrial classification codes and categorise them according to whether they could be considered either:
1. Automatically eligible and adopted immediately for Hong Kong because they are universally
considered green based on existing taxonomies without any major refinement (such as solar and wind); or
2. Potentially green, i.e., activities that are considered green subject to meeting specific technical
screening criteria (such as building).
Specifically, standardised industrial classification codes (such as ISIC and HSIC) are used to form the structure and as the basis for mapping at the granular level. CGT, the EU Taxonomy, the Mainland China Taxonomy, the ASEAN Taxonomy, the CBT and others are then referenced to assess whether an activity can be seen as green without any further refinement. Layer 2. The second layer identifies the key metrics, based on a review of existing global guidance and other national/regional taxonomies on whether:
1. Any existing metrics that can be applied for an activity;
2. the metrics are relevant in the local context; and,
3. They are usable for adoption by financial institutions in Hong Kong.
The metrics identified in this layer could be included in investor reports or annual reports as a standing item for disclosure. They can also be considered as a guide for bond issuers and financial institutions to better understand what type of data to gather and disclose to prove eligibility against the taxonomy. Layer 3. This layer aims to propose technical screening criteria. Specifically, existing global guidance and other national/regional taxonomies have been reviewed to propose:
 Technical screening criteria from existing taxonomies that can be applied to an activity  Adaptations to either the metric or ambition level of an existing screening criteria for it to be applied locally  New metrics and criteria required to be usable in the Hong Kong context. As much as possible, technical screening criteria have been proposed in consultation with industry experts. This may be the case particularly for sectors or activities where there is limited or no guidance in existing taxonomies - for instance shipping. Thresholds have been based on thorough research by the technical experts of the best available science and best available local data to demonstrate a pathway towards zero over time. Where data or scientific pathways are not available, the threshold may have been set based on current best practices with the intention to strengthen this over time following a pathway to zero.

10
Figure 2. Taxonomy layers scheme
Source: Climate Bonds Initiative
In some instances, to cater for the local circumstances and activities in Hong Kong, some proposed metrics or thresholds are not seen in other taxonomies. For example, the proposed “Construction of New Buildings” criteria reference Hong Kong-specific industry standard such as Building Environmental Assessment Method (BEAM) Plus. In such instances, the prototype endeavours to draw an equivalence in ambition between this scheme and those used in international taxonomies. Decision Tree In order to build a robust taxonomy and to clearly understand its potential scope of decarbonisation, the thought process was based on a sequence of decision points that have been summarised in the decision tree below (Figure 3). As a preamble, the decision-making process included an in-depth preparatory assessment of all economic activities as defined by the ISIC x and the HSIC (V.2.0) xi .
Figure 3. Taxonomy criteria decision tree

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Activities and thresholds
The prototype focused 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. The activities were selected for their applicability to the specific circumstances of Hong Kong as well as for their ability to serve as good prototype material. The following sectors and twelve prototype activities were selected:
 Electricity, Gas, Steam and Air Conditioning Supply o Electric Power Generation, Transmission and Distribution  Electricity generation using concentrated solar power technology  Electricity generation using solar photovoltaic technology  Electricity generation from wind power  Transportation and Storage o Land Transport Including Railways  Construction and operation of public transportation system in urban and rural areas  Construction and operation of personal mobility devices, cycle logistics o Water Transport  Transportation of freight by sea  Transportation of passengers by sea  Water supply; sewerage, waste management and remediation activities o Sewage Sludge Treatment  Sewage sludge treatment – anaerobic digestion o Waste Collection, Treatment and Recycling  Collection and transport of non-hazardous waste in source segregated fractions  Utilisation/ treatment of domestic waste – anaerobic digestion  Construction o Construction and Renovation of Buildings  Construction of new buildings  Renovation of existing buildings

12
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 Hong Kong Taxonomy expands to cover other activities in its future iterations. Thresholds and criteria development In order to be eligible as contributing to the environmental objective of climate change mitigation, the activity must be compliant with specific technical screening criteria and related thresholds. These criteria are developed on the basis of technical work conducted for the CGT, Mainland China taxonomy, EU taxonomy and CBT, having regard to the applicability in Hong Kong. Criteria can be either generic (postulating a general principle) or based on an absolute threshold. Concrete criteria are usually constructed in one of the following manners:
 Upper boundary based. These are the most common types of criteria. This criterion usually utilises emission metric of some kind, expressed as emission of GHG in CO2 equivalent per unit of production specific to this industry. o Example: “Lifecycle emission of the installation must not exceed 100gCo2e/kWh”  Best in class. The threshold for the activity may be established as representing the top 10-15% of best installations in the jurisdiction, region, or globally. This method is widely used in sectors with no clear way to calculate a 1.5℃-aligned path such the manufacturing sector (Cement, Steel, Chemicals). o Example: “Emissions from the production of the sintered ore must not exceed 0.163 tCO2e/t product, calculated as average performance of 15% of the best installations in the EU”  Percentage change. If retrofitting or modernisation of the facility is discussed, a fixed percentage change may be an excellent way to establish a threshold. o Example: “New Buildings must be at least 25% more emissions-efficient than their peers according to a constructed baseline” Prototype spreadsheet The prototype spreadsheet provides a summary of the activities, three layers (as conceptualised by Figure 2) and interoperability with other taxonomies. Please see Annex this paper for the spreadsheet. Structurally, the prototype spreadsheet is divided into three layers:

Layer 1: Layer 1 columns of the Spreadsheet represent the mapping of HSIC codes for each activity,
including the activity name and description. More details are provided below:
o To support interoperability and ease of comparison to other taxonomies, the HSIC Industry class for each activity is also mapped against its corresponding ISIC and NACE codes o It is noted that a prototype activity can be mapped against one or more HSIC Industry subclass based on the specific activity description as the HSIC and ISIC classification systems do not perfectly align.
Layer 2: The corresponding Layer 2 columns of the Spreadsheet represent the activity codes of the
specific taxonomy from which the metrics and criteria for the prototype activity have been adopted/adapted. In addition, the adopted/adapted metrics have been explicitly mentioned. In most cases, prototype activities align and adopt/adapt CGT activity metrics and criteria.

Layer 3: The layer 3 column of the Spreadsheet defines the substantial contribution criteria of the
prototype activity. For ease of review, this column references the activity cards, which contain a more granular description of the prototype activity’s technical screening criteria. Sectoral activity cards For the purpose of the prototype taxonomy, a specific activity card was developed for each of the twelve prototype activities. The cards are an important tool for understanding and evaluating the process of forming the criteria and thresholds. They facilitate the use of the taxonomy and its regular update due to developments in climate science. Each card contains detailed description of one or more activities depending on whether metrics, criteria and thresholds for these activities are similar in nature (e.g., different kinds of renewable energy) or must be viewed together because they are interconnected in the real economy. In most cases, one activity card covers several activities with identical sectoral affiliation (e.g., sewage sludge treatment (1 activity), waste collection, treatment and recycling (2 activities), water transport (2 activities) etc. Structurally, the cards consist of several subsections:
 Sector overview. This subsection describes how the sector operates in Hong Kong, its share of emissions, what technology is used, what kind of economic agents are involved in the sector (municipality or private companies), what the most pressing problems present in the sector are, and how the sector can be broken down for the purpose of its taxonomical classification  Metrics. This subsection describes in detail what kind of metrics are going to be used to define criteria and thresholds and why, including the units of measurement and justification for their use  Criteria and thresholds. This section identifies the specific criteria and thresholds for each activity and provides a justification in terms of scientific rigour, applicability in the local context, and consistency with other taxonomies. o The criteria (requirements) are divided into Main and Additional. Main criteria are the criteria taken from the CGT to the extent practicable. In most cases, the same criteria exist in both EU and Mainland China taxonomies and use universal metrics that do not require further adjustment. Hence, they should be applied regardless of the jurisdiction where the project is executed. o Additional criteria are primarily those considered more stringent and/or detailed for specific markets by the CGT. These criteria are only relevant when the project is executed in the jurisdiction mentioned in the criterion.  Questions and outstanding issues. This section refers to what underlying issues were resolved in developing the criteria, what additional information (if any) would the criteria need to be better suited to local conditions. It may also include possible criteria development options. It is generally included only at the initial stages of a taxonomy’s development process for the purpose of conceptualising specific criteria and will be removed when any outstanding issues have been resolved. Activity table. This section contains the final product that constitutes the “body” of the taxonomy as seen by the end user. In most cases, it contains all information needed to use the taxonomy in practice. Figure 4 below provides a breakdown of the different sections included in each activity table.
Figure 4. Activity card parts and description

14
Assessing alignment with an activity-based taxonomy Entities, assets, and projects are the main actors of the real economy. To assess whether an entity, asset, or project (or some of their components) is aligned with a taxonomy whose basic unit is activity, the following illustrative steps could be applied. (1) Breaking down into activity level An entity, asset, or project is first broken down at the activity level, e.g., according to the HSIC/ISIC codes provided in the Activity Card. Expenditure (such as capital expenditure (CapEx) and operating expense (OpEx) or revenue/turnover can then be tagged against each identified activity. (2) Assess eligibility against the technical screening criteria Information including granular data should then be collected and processed so as to determine the eligibility of the identified activities against the technical screening criteria. A combination of thirdparty provided data together with in-house research should support the process. (3) Determining the eligibility of entities, assets, and projects If an activity is aligned, the expenditure (CapEx or OpEx) or revenue/turnover linked to the implementation of the activity could then be considered green. The eligible expenditure could then form the basis of the underlying use of proceeds of a potential green financial instrument - for instance, a green bond or a loan 3 . Similarly, if 100% of the activities of a company is aligned with the screening criteria of the taxonomy, the company in its entirety may be considered green. By contract, if only 75% of the activities of the company is aligned with the criteria, then only the expenditure, turnover or revenue related to that 75% of the activities of the company can be considered eligible as green.

3
In order to operationalise the bond or loan labelling process, an external set of principles (the Green Bond Principles) or a standard (the Climate Bonds Standard) are required, which are both separate frameworks independent of this taxonomy.

15
How should emissions be calculated? What scope should be considered?
Emissions should be calculated using internationally acceptable tools and standards, such as the GHG Emission Protocol xii. The scope of the emissions that need to be considered are usually indicated in the sectoral activity card in the “Activity scope” section. The default scopes are 1 and 2 (direct emissions plus emissions from electricity, water, heating and steam consumed) unless stated otherwise. Other options:
 Only Scope 1 emissions (e.g., direct tailpipe emissions of the car in case of transportation activities)  Lifecycle emission (Scopes 1+2+3), e.g., in the case of energy. Alignment of the Prototype Taxonomy As more and more jurisdictions, regions and organisations provide their green definitions, there is potential for fragmentation across the global financial market. Our prototype taxonomy aims to achieve interoperability with other reference taxonomies. The table below presents whether and how reference taxonomies are adopted/adapted in our prototype taxonomy.
Figure 5. Taxonomy compatibility table
Sectors in Hong
Kong Prototype
Taxonomy
Common
Ground
Taxonomy
EU Taxonomy
Mainland
China
Taxonomy
ASEAN
Taxonomy
(V2)
Climate
Bonds
Taxonomy
Solar Energy
Generation
Tier 1 Green
Wind Energy
Generation
Tier 1 Green
Construction and operation of public transportation system in urban and rural areas Construction and operation of personal mobility devices, cycle logistics Water Transport (freight and passenger) Collection and transport of nonhazardous waste in source segregated fractions Utilisation/ treatment of domestic waste – anaerobic digestion

16
Sewage sludge treatment – anaerobic digestion
Construction of new buildings
Renovation of buildings
Colour Coding
Fully compatible Criteria being developed
Partially compatible
Criteria not yet developed
Examples of application of taxonomies around the world  To label green bonds. A green bond standard/framework defines the use of proceeds, the evaluation and selection of projects and assets, management of proceeds, disclosure and reporting. Among the prominent examples of standards/frameworks are the Climate Bonds Standard xiii, China Green Bond Principles xiv, ICMA Green Bond Principles xv, Asian Development Bank Green Bond Framework xvi etc.  To label green loans. A green loan standard/framework is similar to a green bond standard, but it contains a few distinct features mostly attributed to the fact that loans issuances do not usually require the same level of transparency. Examples includes the Loan Markets Association Green Loan Principle xvii, Green Finance Guidelines for the Banking and Insurance Industry of China xviii, and Russia’s Green Finance Standard xix .  To facilitate disclosure. Reporting guidelines/regulations may refer to a specific taxonomy. Examples include the Sustainable Finance Disclosure Regulation xx and the Corporate Sustainability Reporting Directive xxi issued by the EU.  To direct domestic and foreign capital towards green projects. Examples of these measures can be found in Climate Bonds Initiative report “101 sustainable finance policies for 1.5°C”xxii . Next steps The prototype aims to provide a structure for classifying green activities. Our plan is to fine-tune the prototype as appropriate and summarise the consultation with recommendations on the future work around Q3 2023. Potentially, our future work may include an expansion of the coverage of activities and structural elements (such as the DNSH component) as below to make the taxonomy more complete and usable.

New sectors. The taxonomy should include a maximum of sectors and activities that are material for
the purpose of climate change mitigation. Among them:

Energy
Transportation
Industry
Waste & Water
Agriculture
Construction & Buildings Management
Infrastructure
Important enabling activities: research and development, information and communication
technologies, special purpose software development etc.

Transition activities. Many key sectors of the economy (production of cement, metals, chemicals
etc.) have very limited low-carbon options and it is not feasible for them to transform overnight. Nevertheless, they must be decarbonised in line with the Paris Agreement targets and, therefore,

17 the taxonomy could play an important role in promoting the pathways to achieve a low carbon future for hard-to-abate sectors.
3. New environmental objectives. In addition to climate change mitigation, taxonomies can contribute
to the goals of climate change adaptation, biodiversity conservation, promotion of circular economy, and many more. For example, a portion of Hong Kong is located in an area under constant threat of natural disasters and, as such, operationalising Adaptation and Resilience (A&R) processes through the taxonomy would help capital flow towards appropriate A&R solutions for the city.
4. DNSH and MSS. These two additional components have been popularised by the EU and have since
become an important tool for enhancing the credibility of any taxonomy. However, experience shows that if not properly operationalised, DNSH and MSS can become a burden and hinder the development of the green finance market. A careful balance between the stringency of these requirements and the usability of the taxonomy as a whole should be achieved.
5. Usability guides and “connectors” to different sections of the economy. More work could be done
to make use of the taxonomy connecting the real economy and financial markets. Examples include green bond frameworks, green loan frameworks, disclosure / reporting requirements. Questions for discussion We are inviting interested stakeholders to share their views on the questions below, as well as any other issues related to the development and use of the Hong Kong taxonomy. Taxonomy design and structure

What are your views on the design and structure of the prototype? Do you agree with the principles
on which the prototype is built?
Metrics, technical screening criteria (TSC) and thresholds
Do you have any comments on the metrics, TSC and thresholds? If you foresee any operational
difficulties in implementing the metrics, TSC and thresholds, please provide specific details of alternative/substitute with supporting information and evidence.
Are there any metrics, TSC and thresholds that could be further adapted in the local context?
Are there any other certification schemes or labels in Hong Kong that can be used as proxies for
compliance with TSC?
Next steps
Do you have comments on the elements and activities to be included in the future development of
the taxonomy, such as any new sectors, transitional activities, new environmental objectives and the DNSH and MSS criteria?
Do you have any comments on how the taxonomy should be used in Hong Kong?
Please submit your responses, together with the following information as appropriate, on or before 30 June 2023 to hongkong.consultations@climatebonds.net  Organisation

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 Nature and business of your organisation
 Contact details
Please note that the HKMA and Climate Bonds may, for purposes related to this Discussion Paper as appropriate, reproduce, quote, summarise and publish the written comments received, in whole or in part, in any form and use without seeking permission of the contributing parties. Names of the contributing parties and their affiliations may be referred to in other documents we publish and disseminate through different means. If any contributing parties do not wish to have their names or affiliations disclosed, please expressly state so in their written comments. Any personal data provided will only be used by the HKMA and Climate Bonds for purposes related to this Discussion Paper. List of references i https://www.hko.gov.hk/en/climate_change/obs_hk_temp.htm ii https://www.hko.gov.hk/en/climate_change/obs_hk_sea_level.htm iii https://unfccc.int/process-and-meetings/the-paris-agreement iv https://www.gov.hk/en/residents/environment/global/climate.htm v https://www.fsb-tcfd.org/ vi https://finance.ec.europa.eu/system/files/2022-06/220603-international-platform-sustainable-finance-common-groundtaxonomy-instruction-report_en.pdf

vii https://finance.ec.europa.eu/sustainable-finance/international-platform-sustainable-finance_en viii https://climatecooperation.cn/climate/the-peoples-bank-of-china-the-national-development-and-reform-commission-and-thechina-securities-regulatory-commission-release-green-bond-endorsed-project-catalogue/ ix https://www.sfinstitute.asia/wp-content/uploads/2023/03/ASEAN-Taxonomy-Version-2.pdf x https://unstats.un.org/unsd/publication/seriesm/seriesm_4rev4e.pdf xi https://www.censtatd.gov.hk/en/index_hsic2_code.html xii https://ghgprotocol.org/ xiii https://www.climatebonds.net/files/files/climate-bonds-standard-v3-20191210.pdf xiv http://nafmii.org.cn/ggtz/gg/202207/P020220801631427094313.pdf xv https://www.icmagroup.org/assets/documents/Sustainable-finance/2022-updates/Green-Bond-Principles_June-2022- 280622.pdf xvi https://www.adb.org/sites/default/files/adb-green-bonds-framework.pdf xvii https://www.lsta.org/content/green-loan-principles/ xviii http://www.gov.cn/zhengce/zhengceku/2022-06/03/content_5693849.htm xix https://veb.ru/files/?file=b5409866c0b23504e0b497ea37cb4c3d.pdf xx https://finance.ec.europa.eu/sustainable-finance/disclosures/sustainability-related-disclosure-financial-services-sector_en xxi https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/companyreporting/corporate-sustainability-reporting_en xxii https://www.climatebonds.net/policy/101-policymakers

Annex - Prototype of a Green Classification Framework for Hong Kong

Discussion Paper - Prototype of a Green Classification Framework for Hong Kong

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