PRI, IIGCC and UKSIF weigh in on gas in UK taxonomy, remain quiet on nuclear

Investor groups sign letter to Boris Johnson calling for natural gas to be excluded from the UK's green taxonomy.

The heads of the PRI, IIGCC and UKSIF have written to the prime minister, calling on him to ensure that natural gas is excluded from the UK’s green taxonomy, but have remained quiet on the possible inclusion of nuclear.

In the letter, David Atkin, Stephanie Pfeifer and James Alexander warn that the inclusion of natural gas would undermine the taxonomy’s purpose as well as “discrediting its value for many of our members”.

The trio also argue that including gas would damage the UK’s leadership position on sustainable finance and climate action, adding that the credibility of the taxonomy “must not be undermined by lobbying and political expediency”.

The letter continues that excluding natural gas will not deprive gas-related activities from capital markets funding, and that its inclusion will “send very misleading signals to investors needing clarity on the alignment of their holdings with the UK’s objective of carbon neutrality” and would increase the risk of greenwashing.

While the UK’s green taxonomy advisory group has recommended that unabated gas not be included in the regulations, in line with the recommendations of the country’s climate change committee, The Daily Telegraph reported that business secretary Kwasi Kwarteng was “keen” to see natural gas included in the taxonomy.

Other investors have joined the calls for the government to ditch gas. Will Martindale, co-head of sustainability at investment advisor and manager Cardano, said it is “crucial that the UK government excludes gas from the taxonomy’s scope and upholds its original purpose as a science-based tool to inform investment decisions and re-orientate capital in line with the transition”.

Olga Hancock, deputy head of responsible investment for the Church Commissioners, said the possible addition of natural gas was concerning. “We believe the UK has the opportunity to learn from the lessons of the EU taxonomy, ensuring the UK’s green taxonomy is science-aligned and best-in-class,” she added.

Aside from the EU’s controversial inclusion of gas, South Korea added LNG to its taxonomy in November last year, while Sri Lanka’s green taxonomy, released in May, allows for natural gas under some circumstances.

A spokesperson for the Department for Business, Energy and Industrial Strategy said the government would launch a consultation in the coming months “to provide a shared and clear understanding of which economic activities count as green”, but declined to comment specifically on whether it intended to include gas.

While the three investor networks were unequivocal in their condemnation of natural gas, they remain mute on nuclear, which seems likely to be included. A UK government spokesperson told Responsible Investor in May that there was “strong evidence” to support the inclusion of nuclear energy in the taxonomy.

Spokespersons for all three organisations told RI that they had not taken a formal position on the inclusion of nuclear in the UK’s taxonomy, but a spokesperson for the PRI pointed to recently published general guidance on taxonomy construction.

The UK government’s support for nuclear as a low-carbon source of energy is not new. In its green financing framework, issued ahead of the first green gilt issuance last year, the Treasury said it had ditched nuclear from the framework, as many sustainable investors have exclusions criteria for nuclear power, but that “nuclear power is, and will continue to be, a key part of the UK’s low-carbon energy mix”.