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The UK government has officially decided to abandon its plans to move forward with the UK Green Taxonomy, a system designed to classify climate-friendly and environmentally sustainable economic activities. It was once considered a cornerstone of the country’s broader sustainable finance strategy.
In a statement released today by HM Treasury, officials explained that the decision was made following an extended public consultation. The results? Less than half of the respondents believed the taxonomy would be valuable. Many participants suggested that other components of the sustainable finance framework should take precedence instead.
Initially introduced in 2020 under then-Chancellor Rishi Sunak, the idea behind the taxonomy was to create a common rulebook—one that would help define what truly sustainable means, improve transparency around the environmental impact of companies’ activities and investments, and support the UK’s transition to a greener economy.
The UK’s decision stands in contrast to a growing global trend. Many countries, including the EU, Australia, Canada, India, Singapore, and Hong Kong, have already implemented or are actively developing their sustainable finance taxonomies. Just this month, the EU launched a simplification drive aimed at making its taxonomy easier to use.
According to UK government documents, nearly 20 jurisdictions already have a taxonomy in place, while roughly 30 others are exploring the implementation of one.
The UK consultation, launched in November 2024, asked stakeholders whether such a system made sense for the British market. The results painted a divided picture. Only 45 per cent expressed clear support for the taxonomy. The rest were either unsure or outright sceptical. Many raised concerns about how the taxonomy would work in real-world scenarios, mainly based on lessons learned from using other frameworks internationally. Several questioned whether the system would truly meet its goals.
In fact, around a third of respondents argued that the taxonomy’s core aims—such as guiding investment into sustainable sectors and clamping down on greenwashing—could be better achieved through alternative policies. These included the UK Sustainable Reporting Standard, transition planning frameworks, sector-specific roadmaps, and targeted economic incentives.
Some respondents also pointed out that maintaining and updating a taxonomy would require significant time and resources, which could ultimately drain focus and funding from other, more urgent parts of the sustainable finance agenda.
So, for now, the UK Green Taxonomy has been shelved. Whether it’s revived down the line remains to be seen. Still, for the moment, policymakers seem to be shifting their focus toward tools that, in the eyes of the industry, are more practical and have an immediate impact.
In its statement announcing the decision, HM Treasury said:
“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 the government’s 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.”
Sustainable investment groups expressed disappointment at the government’s decision. While welcoming the government’s acknowledgement of the importance of transition plans and the UK SRS, for example, Oscar Warwick Thompson, Head of Policy and Regulatory Affairs at the UK Sustainable Investment and Finance Association (UKSIF) said that:
“It’s disappointing that the government has concluded that a green taxonomy has no place in the UK’s sustainable finance framework. We now want to see swift delivery of commitments on transition plans and the sustainability reporting standards.”