The end of the road for a UK Green Taxonomy

On 15 July 2025, the government confirmed that it will not proceed with a UK Green Taxonomy (the UK Taxonomy), marking the end of a number of years of deliberation on this as a potential initiative to help to deliver the government’s green goals.

The UK Taxonomy proposals would have introduced a classification tool providing a framework to define which economic activities support climate, environmental or wider sustainability objectives. Following a consultation in November 2024, the government has concluded (in its response to the consultation) that a UK Taxonomy would not be the most effective tool to deliver the green transition and should not be part of the UK’s sustainable finance framework. 

The government’s assessment

The government launched the November consultation as part of its plans to deliver a ‘world-leading sustainable finance framework’, with the aim of gathering evidence on the fundamental value of a possible UK Taxonomy. The consultation did not set out a specific framework. The discussion on a UK Taxonomy did not start there – there was a long period of discussion on the topic before the consultation was launched, which had also included the establishment in 2021 of the Green Technical Advisory Group (GTAG), a body designed to provide technical advice to the government on the development and implementation of a UK Taxonomy (and which we have considered in more detail in a previous blog post).

The consultation received 150 responses, which the government sees as having made clear that designing and maintaining any UK Taxonomy would be an ongoing, time-consuming process. It considers that the policy would not be proportionate to the possible returns and has therefore concluded that it should not be taken forward.

In its consultation response, the government indicates that it will be more impactful for it to instead focus on other policies that are more likely to deliver the green transition. Existing initiatives which it refers to in this context include the government’s current consultations on the UK Sustainability Reporting Standards (UK SRS) and on the development and implementation of transition plans as well as the Financial Conduct Authority’s fund labelling and anti-greenwashing rules. 

Responses to the consultation 

Overall, the government considers that both consultation responses and stakeholder engagement made clear that views on the value and use cases of a UK Taxonomy are very mixed. The idea was met with positive sentiment by 45% of respondents, but 55% of respondents had a mixed or negative sentiment toward the policy, with concerns largely focusing on its application (driven by experiences with other taxonomies) and concerns on the extent to which taxonomies deliver on desired objectives. 

A third of respondents believed that other policies would be more impactful in achieving the government’s core objectives than a UK Taxonomy, including the UK SRS, transition plans and sector roadmaps, but also real economy policies and economic incentives.

Objectives of a UK Taxonomy

The consultation sought views on the value of a UK Taxonomy in supporting the two main objectives of (i) channelling capital into the net zero transition and (ii) preventing greenwashing. The government does not consider there to be compelling evidence that a UK Taxonomy would deliver these objectives in a proportionate way, commenting that:

• taxonomies can provide a helpful data point when identifying credible, sustainable investment opportunities, but do not directly impact the risk profile or economics of an investment, which are the fundamental drivers of funding decisions and the cost of capital. As such, a UK Taxonomy was seen as unlikely to have a material impact on final investment decisions; and
• in respect of greenwashing, the government considers that there is some evidence that a UK Taxonomy could help to provide clarity and transparency. However, it could also increase fragmentation at an international level, and significant work would be required to navigate the challenges of interoperability. 

In addition to the existing policies referred to by the government in its assessment, other initiatives which respondents considered would be more impactful in achieving these objectives and help to channel investment included sector-specific roadmaps outlining government policies and decisions on future regulation, grant schemes or taxation changes.

Interaction with existing policy 

Respondents acknowledged that there is currently no direct alternative to a UK Taxonomy in the UK for activity-level standards, but noted that some organisations are already using other taxonomies or market frameworks (for example the EU Taxonomy, due to the size of their operations in the EU, or taxonomies published by associations which can be voluntarily applied). As such, the additional value of a UK Taxonomy was seen as unclear. 

Additionally, sustainability policy has developed significantly over the last years. Many respondents felt that the concerns a UK Taxonomy was trying to address are already dealt with by other initiatives, including advertising regulations or disclosure regimes (such as the UK SRS), such that the introduction of a UK Taxonomy could create a risk of duplication. 

International operability

The consultation responses on international operability highlighted key tensions in designing an effective UK Taxonomy. In particular, the government considers international operability to be a significant factor in developing a usable UK Taxonomy, and respondents noted that divergence could create additional cost, burden and friction. As such, two thirds of respondents asked for alignment with the existing EU Taxonomy. However, a significant number of respondents also noted challenges in the practical implementation of the EU Taxonomy, which was seen as not accounting well for transition activities and the complexity of which can make outputs difficult to understand. As such, reconciling interoperability with ensuring that a UK Taxonomy would be effective and fit within UK policy and law would require a difficult balance, which the government notes is also highlighted by previous work by the GTAG. 

Other considerations

The consultation covered a range of other questions, including possible use cases for a UK Taxonomy, methods for evaluating success, updates to the UK Taxonomy over time and fundamental design questions. The government has not responded to all of these in full, given its overall conclusion that a UK Taxonomy is not the right way forward. 

However, responses to these questions as set out in the government’s consultation response generally reinforce the indication that a UK Taxonomy would be a significant and challenging long-term project, requiring careful balancing exercises to ensure that it would fulfil a range of potential use cases, necessitating ongoing work and posing challenges for measuring its impact. 

Our thoughts

The government’s consultation response reiterates that ‘growth is the number one mission of this government’. While sustainable finance is seen as a potential driver of that growth, the government’s response is consistent with its recent messaging that proportionality of policy-making is a key focus in this area.