United Kingdom abandons environment classification system
UK Abandons Green Taxonomy, Embraces Alternative Measures
The UK government has decided to abandon its plans to introduce a green taxonomy, following a public consultation that revealed a mixed response from stakeholders. Over half of the respondents expressed doubts about the value of implementing the green taxonomy, with concerns primarily centered around its real-world application and effectiveness.
The decision to abandon the taxonomy was made after encountering significant scepticism from industry stakeholders, including the private sector, legal professionals, charities, and NGOs. The government concluded that the UK green taxonomy would not be the most effective tool to drive the green transition and could divert resources away from other more impactful initiatives.
Instead, the UK plans to focus on alternative measures to tackle greenwashing and promote sustainable finance. These measures include adapting the International Sustainability Standards Board (ISSB) reporting standards for sustainability disclosures, improving sustainability assurance practices, implementing 1.5ºC-aligned transition planning requirements for companies, and encouraging market consultations and regulatory frameworks that integrate with existing global initiatives.
The government's aim is to foster transparency and rigor in environmental claims without the complexities associated with a dedicated domestic taxonomy. These measures, combined with existing international standards, are seen as a more practical path to making the UK a global hub for green and transition finance.
The EU introduced its sustainable taxonomy in 2020, but it has attracted controversy, particularly over the inclusion of nuclear energy. The UK's green taxonomy was modeled after the EU's counterpart, but the government has decided to take a different approach.
The consultation for the introduction of mandatory transition planning strategies in the UK remains open until mid-September. The UK government is seeking industry feedback on these strategies, which are intended to address greenwashing and define which economic activities or assets are sustainable.
The decision to abandon the green taxonomy drew criticism from sustainable investment groups like the UK Sustainable Investment and Finance Association (UKSIF), who viewed the green taxonomy as a critical step against greenwashing. However, the government prioritized accelerating private sector investment into net zero and climate-aligned investments through more proven frameworks.
In summary, the UK has abandoned the green taxonomy due to mixed stakeholder feedback, implementation challenges, and limited added value compared to existing frameworks. The alternatives under consideration focus on enhancing sustainability disclosure standards and transition planning aligned with international initiatives to mitigate greenwashing risks.
[1] UK Government Press Release, "UK to focus on alternative measures to promote sustainable finance", [date] [2] UKSIF Statement, "UKSIF responds to government's decision to abandon green taxonomy", [date] [3] Financial Times, "UK abandons green taxonomy in favour of alternative measures", [date] [4] European Commission, "EU sustainable finance taxonomy", [link] [5] The Guardian, "UK government abandons green taxonomy amid scepticism from industry", [date]
- The UK government's focus will shift from the green taxonomy to environmental science and climate-change, as it aims to foster transparency and rigor in environmental claims through alternative measures that promote sustainable finance.
- In the absence of the green taxonomy, the UK plans to encourage the adoption of International Sustainability Standards Board (ISSB) reporting standards, improve sustainability assurance practices, and implement transition planning requirements for companies, all in an effort to make the UK a global hub for green and transition finance.
