UK investment groups are sending opposing messages to the UK government about whether it should go ahead and introduce a green taxonomy.
Although it also addressed taxonomy design considerations, in a consultation closing today the UK government asked the fundamental question of whether a UK taxonomy would be “distinctly valuable” in supporting the goals of channelling capital and preventing greenwashing” in light of other government policy.
According to the UK Sustainable Investment and Finance Association (UKSIF), the government “should proceed with the delivery of a ‘science-based’ and as usable as possible green taxonomy”.
The taxonomy should be based largely on the EU taxonomy’s overall framework and scientific metrics recommended by the UK government’s taxonomy advisory body, “while applying a voluntary approach to taxonomy-related disclosures”.
The mainstream UK asset management trade body, however, has said that although investment managers are “able to articulate a potential use case for the taxonomy, the industry on the whole does not regard it as likely to be distinctly valuable in achieving the government’s aims currently”.
“When it was first announced in November 2020, the use case for a UK green taxonomy was clearer,” said Paul Scaping, public policy specialist at the Investment Association. “However, since then, the UK government has made significant progress towards an established framework to channel capital into environmentally sustainable outcomes and prevent greenwashing.
He added: “Today many in the UK investment management industry are also already using EU taxonomy and other international standards.
“The introduction of a UK-specific taxonomy therefore risks adding complexity and costs without clear benefits – instead, we would suggest that the government focuses on developing clear sectoral policies and supporting the transition planning framework to better channel capital to sustainable activities.”
International leverage
In its consultation response, UKSIF said there remained “some” appetite across various parts of the global and UK private finance industry for the use of taxonomies, but argued more strongly in favour of the UK introducing a taxonomy by saying that forgoing one would mean “the UK may crucially risk missing out” on shaping discussions about developing a common global approach to taxonomies.
“With taxonomy development globally continuing to progress in recent years, the UK should seek to more proactively contribute to ongoing discussions at international fora, which could be facilitated through its own taxonomy approach and maintain a more principles-based perspective, as our collective understanding of the value of taxonomies continues to evolve,” UKSIF said.
“In spite of the delays we have seen in recent years, we believe a green taxonomy could still play an important, additive role as part of government’s broader ambitions to enhance the UK’s existing global leadership on sustainable finance and position as a ‘clean energy superpower’, while noting there will be other policy levers (e.g. clear decarbonisation pathways for sectors) that government can utilise to realise these objectives more effectively and quickly.”
UKSIF was a representative member of the Green Technical Advisory Group, the body advising the UK government on the development of a taxonomy.
This week the European Commission’s sustainable advisers outlined a plan for how the EU executive could streamline the EU taxonomy by making technical changes rather than having to include it a contested ‘omnibus package’ targeting amendments to other EU sustainable finance laws.
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