The UK government’s delay of the country’s green taxonomy provides an opportunity to get it right, according to Faith Ward, chair of the Institutional Investors Group on Climate Change (IIGCC).
At the end of 2022, economic secretary to the treasury Andrew Griffith said that the government would not meet a legal deadline for legislating on the taxonomy by 1 January 2023.
“The government believes there is a benefit in reviewing its approach to taxonomy developments to maximise the effectiveness of our substantiable finance agenda,” said Griffiths.
He added, “It will use powers granted it by the Financial Services and Markets Bill to repeal the legal obligation to make rules by January.
A further update in the Green Finance Strategy is expected in early 2023.
The government published a greening finance roadmap in October which outlined its plans for a consultation on technical screening criteria for climate change mitigation and adaption in the first quarter of this year. However, no consultation appeared.
Although many expected the government to miss the deadline, industry groups condemned the move.
Ward, who also sits pm the Green Technical Advisory Group, said that the UK needs to develop a credible taxonomy if it wants to achieve its ambition to become the world’s first net zero aligned financial centre.
She added, “Investors and companies are urgently seeking clarity on how to align their investments and activities with the UK’s climate goals, and the taxonomy is a vital tool to for achieving this.”
Independent climate change think tank E3G also called the government’s decision is disappointing.
James Alexander, CEO of UK Sustainable Investment and Finance Association called it “hugely disappointing”, noting that development of the taxonomy remains “very important” for investors and firms looking to align with net zero.
He urged the government to “restate its intention to swiftly deliver a science based taxonomy and a clear timeline for implementation, following through on the UK’s commitments made in the greening finance roadmap.”
Independent climate change think tank E3G also said the government’s decision is disappointing.
It added, “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.
Eduardo Lopez, researcher at E3G, also expressed his disappointment. “Action by the financial sector is central to the UK’s goals for net zero emissions by 2050 and for climate adaptation,” he said 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.”
However, E3G said there is an upside.. 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”.
