Investor groups and the UK’s own Green Technical Advisory Group (GTAG) have heavily criticized delays to the implementation of the country’s green taxonomy, after the government said on Wednesday that it would miss the deadline for implementation.
In a written statement to Parliament, 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 and would also be reviewing its approach to taxonomy development.
“The government believes that there is benefit in reviewing its approach to taxonomy development to maximise the effectiveness of our sustainable finance agenda,” he said. It will use powers granted it by the Financial Services and Markets Bill to repeal the legal obligation to make rules by January.
Further updates are promised as part of an updated green finance strategy in early 2023.
In a greening finance roadmap published in October, the UK government said it expected to consult on technical screening criteria for climate change mitigation and adaptation in the first quarter of this year, but no consultation has appeared.
It had been widely expected that the UK would miss its deadline as time shortened, but industry groups nonetheless condemned the decision.
James Alexander, CEO of the 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”.
Eliette Riera, the PRI’s head of UK policy, said that a robust science-based taxonomy and mandatory disclosure were “critical” to supporting green growth in the UK economy. She said the delay to the taxonomy “must not translate into a step backwards” and that the government needs to demonstrate “renewed, credible and ambitious commitments to delivering on the PMs promise to become the world’s first net zero financial centre”.
A statement by the GTAG, which published its advice to the government in early October, welcomed the clarity provided by the statement, but also described the decision as disappointing.
The GTAG statement said the priority should be “to ensure the design and implementation of such a complex policy instrument is done in a way that maximises its usability and usefulness for the market”. The group had previously argued that the government should consider amending its original implementation deadline given recent political turmoil.
Faith Ward, chair of the Institutional Investor Group on Climate Change (IIGCC) and chief responsible investment officer at LGPS pool Brunel, said in a statement that the IIGCC hoped the government would use the additional time to ensure the taxonomy is well-designed and fulfils its intended goal.
Ward, who also sits on the GTAG, added that the UK needs to get development of the taxonomy right if it is to achieve its ambition to become the world’s first net zero-aligned financial centre. “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 for achieving this,” she said.
“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.”