UK government scraps plans for Green Taxonomy

HM Treasury has announced today that it has decided not to proceed with plans to develop a UK Green Taxonomy, a classification system to define which economic activities and assets are considered to be environmentally sustainable.

The Treasury launched a consultation in November 2024, seeking views on whether the UK should create a UK Green Taxonomy as part of the UK’s sustainable finance framework (see our earlier blog post).  The Treasury has now published its response to the consultation stating that: 

“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 our 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.”

Mixed views

150 different organisations responded to the consultation, with the Treasury describing the responses to be “very mixed” with 45% of respondents saying they would welcome a UK green taxonomy, while 55% responded with either mixed or negative sentiments.

HM Treasury explains that the concern largely centred on the real-world application of the taxonomy, primarily driven out of experience of working with other taxonomies. The responses flagged that the challenges in the practical implementation of the EU Taxonomy mean that whilst the aim of the policy is to enhance transparency, its complexity can hinder effective reporting. Many pointed out that this can make it more difficult for consumers and retail investors to understand the output and then use this to make investment decisions or an assessment of green credentials. There were also concerns that any UK taxonomy could “add further fragmentation” on an international stage, particularly if it was not aligned with the EU’s approach. 

In addition, many respondents highlighted that other policies, such as the UK Sustainable Reporting Standard (UK SRS), transition plans and sector roadmaps, would be more impactful to achieve the core objectives set out for the taxonomy of channelling investment and reducing greenwashing.

The government concludes that it will continue to monitor and assess whether more needs to be done to mitigate greenwashing outside of a green taxonomy framework.