UK Government Abandons Green Taxonomy to Prioritize Alternative Sustainable Finance Policies

The UK government has decided to abandon plans for a UK Green Taxonomy, concluding it would not be the most effective tool to support the green transition or be part of the sustainable finance framework. This decision follows a consultation where 55% of respondents expressed mixed or negative views, and the government found other policies, such as enhanced sustainability reporting standards and corporate transition plans, to be higher priorities. The taxonomy, initially proposed in 2020 to classify environmentally sustainable economic activities, will be replaced by efforts to align UK sustainability reporting with global frameworks and implement new ESG fund labeling rules to reduce greenwashing. The government emphasized its commitment to making the UK a global hub for green and transition finance through these alternative measures, including defining 'transition finance' and supporting private market asset management. This move aligns the UK with a broader international context where many countries have developed taxonomies, but the UK will focus on policies with greater industry support and impact. Overall, the UK Treasury aims to boost the competitiveness of the financial sector while accelerating investment into the net-zero transition through more pragmatic and prioritized approaches.