What's new?
On 14 November 2024, HM Treasury published a consultation to assist in its work to determine whether a UK Green Taxonomy would be beneficial in complementing existing sustainable finance policies, particularly in mitigating greenwashing and directing capital towards the Government's sustainability objectives. This follows the work of the Green Technical Advisory Group (GTAG) in developing a UK Green Taxonomy for financial and non-financial firms.
What does the consultation paper say?
With the establishment of the National Wealth Fund (NWF) and GB Energy (GBE) HM Government sees the clean energy transition as an opportunity to boost growth, reduce the cost-of-living and make Britian energy independent. The Government believes that delivering a regulatory framework to support sustainable growth will enable the private sector to realise the commitment to sustainable investment.
Among other things, the consultation paper raises questions on the following:
potential market and regulatory use cases for a UK Taxonomy to enhance sustainable investment and mitigate greenwashing;
design features that would make a UK Taxonomy most useable and effective;
how a UK Taxonomy could support the allocation of transition finance and the specific design features that would facilitate this;
the interoperability of a UK Taxonomy with existing taxonomies and how it could be designed to ensure effectiveness and usability;
governance and oversight arrangements necessary to maintain the credibility and relevance of a UK Taxonomy over time.
The Government is keen to 'learn the lessons' from taxonomy implementations in other jurisdictions to understand how to bring about a taxonomy in the UK effectively. Alongside the questions relating to the practicability of a UK Taxonomy there is a focus on the potential interaction with other sustainable finance regulations, namely:
International Sustainability Standards Board (ISSB);
Transition Plan Taskforce (TPT);
Transition Finance Market Review (TFMR);
FCA's sustainability disclosure and fund labelling regime (SDR);
Regulation of Environmental, Social and Governance (ESG) ratings.
Next Steps
The consultation closes on 6 February 2025.
