Following the UK government’s announcement this week that the UK’s green taxonomy would be delayed, Faith Ward, chair of the Institutional Investors Group on Climate Change (IIGCC), said the UK government now has the chance to get it right.
“Following [the] decision to delay the implementation of the UK’s green taxonomy, we hope that government will use this additional time to ensure the taxonomy is well-designed and fulfils its purpose as the cornerstone of the UK’s sustainable finance framework,” she said.
In a published Written Ministerial Statement on Wednesday, Joanna Penn, parliamentary secretary in HM Treasury, announced the government would “not make secondary legislation under the Taxonomy Regulations this year.”
This means that the UK government will not be releasing a UK green taxonomy before the end of this year. The government will repeal the legal requirement and will provide a further update in the Green Finance Strategy in early 2023, Penn stated.
Independent climate change think tank E3G said the government’s decision is disappointing.
“The UK’s Green Taxonomy is a centrepiece of the Greening Finance Roadmap, designed to provide the market with a clear science-based definition of green investment. Investors and businesses have called for government to set a clear standard and prevent greenwashing,” the organisation added.
However, there is an upside, it said. In light of market feedback that the EU taxonomy is difficult to use, together with stakeholder concerns that the EU taxonomy is not entirely science-based, “the UK is now in a position to learn from these experiences and to ensure that the UK taxonomy is usable and has high integrity”.
As of late 2022, many UK firms are required to use the EU taxonomy, meaning that the UK has lost the opportunity for early-mover advantage, E3G said. “International convergence and interoperability will need to be a key priority for the UK as it takes its own approach forwards.”
Eduardo Lopez, researcher at E3G, said: “Action by the financial sector is central to the UK’s goals for net zero emissions by 2050 and for climate adaptation. If the UK is to be a net zero financial centre, as promised at COP26, then it will be essential to have a green taxonomy that defines net zero investment.”
IIGCC’s Ward added: “We now urge the government to deliver on its commitments under the Greening Finance Roadmap and set out a clear timeline for implementing a robust, science-based taxonomy as swiftly as possible. Through our participation in the Green Technical Advisory Group, we stand ready to continue working with government to lay the foundations for a coherent policy environment that supports the transition to net zero.”