The UK government has announced it will not move forward with its plans to develop and implement a UK Green Taxonomy, a proposed classification system aimed at categorising climate and environmentally sustainable economic activities. This taxonomy was intended to be a significant component of the UK’s sustainable finance framework.
HM Treasury released a statement indicating that the decision was influenced by feedback from a consultation, which revealed that less than half of the respondents valued the taxonomy. Many participants felt that other areas within the framework should be prioritised.
The initiative to develop a UK Green Taxonomy was launched in 2020 by then-Chancellor Rishi Sunak. It aimed to create a standard framework for defining environmentally sustainable activities and to enhance the understanding of firms’ environmental impacts while facilitating the transition to a sustainable economy.
This decision occurs as other countries, including Australia, the EU, Singapore, Hong Kong, Canada, and India, have either established or are developing their sustainable finance taxonomies. The EU recently initiated a significant simplification process for its taxonomy. According to the UK’s consultation document, approximately 20 jurisdictions currently operate a government-endorsed taxonomy, with around 30 more considering development.
The consultation, initiated in November 2024, sought opinions on the value of a UK Green Taxonomy as part of the sustainable finance framework. Results showed that only 45% of respondents expressed a positive sentiment, while 55% had mixed or negative views. Concerns centred on the practical application of the taxonomy and its effectiveness in achieving its objectives.
About a third of respondents suggested that the taxonomy’s goals, such as directing investment and addressing greenwashing, could be better achieved through other policies, like the UK Sustainable Reporting Standard (UK SRS), transition plans, and sector roadmaps. Some respondents also raised concerns about the resources required to maintain the taxonomy, potentially affecting other sustainable finance initiatives.
In its announcement, HM Treasury stated: “After careful consideration of the consultation responses, 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. Whilst the government’s ambitions to continue as a global leader remain unchanged, the consultation responses showed that other policies were of higher priority to accelerate investment into the transition to net zero and limit greenwashing.”
Sustainable investment groups have expressed disappointment with the government’s decision. Oscar Warwick Thompson, Head of Policy and Regulatory Affairs at the UK Sustainable Investment and Finance Association (UKSIF), acknowledged the importance of transition plans and the UK SRS but stated, “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.”
For further details, you can access the [consultation response summary](https://assets.publishing.service.gov.uk/media/687128b910d550c668de3ee9/UK_Taxonomy_consultation_response.pdf).
