Sustainable Finance | UK Green Taxonomy Abandoned

Something of a pivot on a UK green taxonomy

There was an interesting development in the world of sustainable finance in July, with the government to step back from a UK green taxonomy.

After a 12-week consultation, the decision is that a UK green taxonomy is not the most effective tool to deliver the green transition, and it should not be part of the UK’s sustainable finance framework.

You can read the 15 July 2025 consultation response here.

What was the purpose of the consultation?

The question posed was whether, to meet the clean energy transition and boost economic growth, a UK green taxonomy should sit alongside policy actions already taken — notably the establishment of GB Energy working alongside the national wealth fund, and reform of planning and grid connections policy.   Many have argued it could help achieve the government’s ambition for the UK’s global leadership in sustainable finance, within the context of our new industrial strategy.

The aim of a taxonomy — i.e. a standard classification to apply across economic activities — would be to facilitate sustainable investment and/or reduce greenwashing. It would clarify what activities are ‘green’, helping investors assess and compare financial products and deploy capital towards sustainable growth. A taxonomy could also improve transparency and improve verification of green and sustainability claims. For example, the government has indicated that nuclear could be classified as green.

What was the main feedback from the consultation?

Feedback presented from the consultation was mixed, pointing out the complexities and real-world challenges of applying green taxonomies, with evidence from the EU’s green taxonomy framework touted by some as offering a cautionary example. Yet with around 20 jurisdictions currently operating government-endorsed taxonomies, and 30 more considering developing one, there is a major concern that a UK taxonomy could ‘add further fragmentation’ globally, and despite its failings many respondents argued for alignment with the EU taxonomy. And all of these taxonomies are not static frameworks, but require monitoring and updating.

Respondents also pointed out the existing UK rules that already address greenwashing — notably standards and guidance from the Competition and Markets Authority, the Advertising Standards Authority standards, and Financial Conduct Authority sustainability disclosure requirements — not to mention upcoming sustainability and climate related financial disclosure requirements.

What was the outcome of the consultation?

It would appear the conclusion is there is no compelling evidence to indicate that a UK green taxonomy would deliver the intended objectives in an effective or proportionate manner. Therefore, the government has concluded that a UK taxonomy should not be part of their sustainable finance framework. This marks something of a shift in the UK’s approach to sustainable finance.

The 12-week consultation ran from 13 November 2024 to 6 February 2025. The consultation outcome was published on 15 July 2025 by HM Treasury.

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