The Hong Kong Stock Exchange (HKEK) is back in the news as the banking institution launches its new sustainable finance taxonomy. The Hong Kong Taxonomy for Sustainable Finance seeks to protect against greenwashing by introducing science-based criteria and thresholds for sustainable finance activities. ESG Today reports on the new taxonomy stating:
“According to the HKMA, the sustainable finance taxonomy provides an important tool by enabling a standardized framework for the classification and labelling of financial products based on their environmental sustainability characteristics, allowing investors to identify and invest in activities that generate a positive impact on the environment, and to avoid those with a negative impact, in addition to aligning investments with climate goals while reducing the risk of investing in assets that are not aligned with a low-carbon future, as well as unlocking investment opportunities in green technologies and sustainable projects.”
The taxonomy also appears to have been designed with global markets in mind as it considers other taxonomy structures in Mainland China, the EU, and the ASEAN by aligning its categorization criteria with the International Standard Industrial Classification of All Economic Activities (ISIC). Sustainable finance taxonomies are great tools for financial regulators looking to prevent greenwashing, but they also come with substantial drawbacks and flaws, as seen in the EU’s implementation of its taxonomy. In any event, taxonomy laws are proliferating and financial services firms would be wise to monitor these developments and avoid greenwashing in their services. Greenwashing in finance comes with serious regulatory risks, as even countries without taxonomy regulations can often bring enforcement through existing laws prohibiting misrepresentations.
If you aren’t already subscribed to our complimentary ESG blog, sign up for daily updates here: https://practicalesg.com/subscribe/
Photo Credit: LT – stock.adobe.com
