Green taxonomy ‘has no place’ in UK

The UK government has confirmed its decision to drop the UK green taxonomy following consultation with the investment industry. 

Emma Reynolds, economic secretary to the Treasury and City minister, said in a note on the outcome of the consultation: “After careful consideration, the government has concluded that a UK taxonomy would not be the most effective tool to deliver the green transition and should not be part of our sustainable finance framework”.

There has been initial concern surrounding the decision with head of policy and regulatory affairs at UKSIF Oscar Warwick Thompson commenting: “It’s disappointing that the government has concluded that a green taxonomy has no place in the UK’s sustainable finance framework. We now want to see swift delivery of commitments on transition plans and the sustainability reporting standards.”

First proposed in November 2020, the Taxonomy is meant to support investment into activities aligned with sustainability goals and to mitigate greenwashing. However, its implementation has been delayed multiple times, and the latest consultation is a response to “mixed feedback” on the value of taxonomies at large.

Previously PA Future has covered the investment community was split on the need for a UK green taxonomy with some saying it is a necessary step to direct more capital toward sustainable investments, and others concerned it will add unnecessary complexity to an already bloated regulatory landscape.

At the time, Julia Dreblow, director of SRI services, said: “There are people and groups I know and respect who have very different opinions. Some say a green taxonomy in the UK is vital; others say it is not needed.” 

Warwick Thompson did, however, welcome the acknowledgement of the importance of climate transition plans and the UK sustainability reporting standards in supporting the wider economy’s efforts to reach net zero, as announced in the government’s financial services sector plan. 

It is good to see further pledges to ensure the Financial Policy Committee and Prudential Regulation Committee are supporting this goal.

At London Climate Action Week, the government published three consultations on the topic of sustainability disclosures. These include:

• A consultation on adopting the International Financial Reporting Standards (IFRS) sustainability reporting standards to create UK Sustainability Reporting Standards (UK SRS).
• A consultation on introducing climate-related Transition Plan (TP) requirements.
• A consultation on developing an oversight regime for the assurance of sustainability-related financial disclosures.