The government has announced the decision not to proceed with the UK Green Taxonomy, a proposed means to help provide for the long-term certainty that the sustainable finance industry needs to scale and focus on key emerging opportunities, patrt of the governments plans for economic growth.
In its response to the consultation on the Green Taxonomy, the government said that it had “concluded that a UK Taxonomy would not support the government’s vision for the sector, and that work to develop a UK Taxonomy should therefore not proceed”.
It went on to explain that having assessed the two objectives of the policy, channelling capital and reducing greenwashing, “the government does not consider there to be compelling evidence that a UK Taxonomy would deliver these objectives in a proportionate way.
“Whilst there is some indication that there is positive sentiment towards the policy, the distinct value of a UK Taxonomy over and above other policy was not clear. There was limited evidence of a compelling use case for a specific UK Taxonomy that would achieve outcomes which could not be otherwise achieved using existing taxonomies or market frameworks, or other policy.”
It said that international experience of designing and maintaining such a system, “would be a time-consuming and
ongoing process. This could risk diverting public and private sector energy from other activities that are more likely to drive UK economic growth, the net zero transition, plans to restore and protect our natural world and adapt to the changing climate.
“The government is clear that, in a time where resources are limited, it is important to give stakeholders clarity on the approach to a UK Taxonomy and it would be more impactful to focus on other policies to achieve the objectives of
channelling capital and reducing greenwashing.”
Commenting on the announcement, Gemma Woodward, head of responsible investment at Quilter Cheviot said, while the government’s decision not to proceed with an UK Green Taxonomy “may look on the surface as if it is abandoning its ambitions to lead on sustainable finance, this is far from the case”.
She cited three recent consultations issued, focussed on sustainability reporting, a registration scheme for providers of assurance for sustainability related financial disclosures and transition planning.
Woodward said: “If anything, it is pleasing to see the government recognise that an UK Green Taxonomy may have limited impact at a time when the industry is already contending with a slew of regulations. Rachel Reeves said she wants the UK to be a global leader in sustainable finance, and as such we cannot take this development as a sign that strategy has changed.
“The government has promised to provide a ‘road map of future regulatory changes’ as part of the next consultation phases. This is something we would all welcome as this will set out a, hopefully, robust foundation and future pathways for sustainable finance. The global regulatory picture is still incredibly fragmented, and with landmark regulations from the past 12 months still being embedded into processes, any clear picture that can be provided by policy makers of the direction of travel will be vital and the only way we can help combat issues such as greenwashing.”
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