United Kingdom Abandons Strategy for Sustainable Financial Categorization
The UK government has announced its decision to halt the development of the UK Green Taxonomy, a proposed classification system for environmentally sustainable economic activities. This decision comes after a consultation that revealed limited support and several concerns about the taxonomy's practical effectiveness and real-world applicability.
Launched in 2020 by then-Chancellor Rishi Sunak, the UK Green Taxonomy was intended to provide a common framework for determining which activities can be defined as environmentally sustainable. However, the government's feedback showed that a majority of respondents (about 55%) had mixed or negative opinions on the value of the taxonomy, while only around 45% expressed positive views.
One of the main concerns raised by respondents was the effectiveness of taxonomies in achieving the intended sustainability objectives. Many felt that other areas of the sustainable finance framework were of higher priority, such as transition plans, sector roadmaps, real economy policies, and economic incentives. The UK Sustainable Reporting Standard (UK SRS) was also suggested as a more effective means of channelling investment and tackling greenwashing.
The decision to abandon the UK Green Taxonomy was announced by HM Treasury on July 15, 2025, with a focus on alternative sustainable finance measures rather than taxonomy development. Oscar Warwick Thompson, Head of Policy and Regulatory Affairs at the UK Sustainable Investment and Finance Association (UKSIF), expressed a desire for swift delivery of commitments on transition plans and the sustainability reporting standards.
The government's ambitions to continue as a global leader in sustainable finance remain unchanged, but the development of the UK Green Taxonomy was deemed to be of lower priority compared to other policies aimed at accelerating investment into the transition to net zero and limiting greenwashing.
The move away from the UK Green Taxonomy does not mean the end of sustainable finance efforts in the UK. In fact, around 20 jurisdictions have a government-endorsed taxonomy in operation, and approximately 30 more are considering developing a taxonomy. Other countries, such as Australia, the EU, Singapore, Hong Kong, Canada, and India, have already instituted or are in the process of developing sustainable finance taxonomies.
The EU, for example, launched a major simplification process to its taxonomy earlier this month. Despite the UK's decision, sustainable investment groups have expressed disappointment at the government's decision to abandon the UK Green Taxonomy.
The consultation response summary is available for access, providing a detailed look at the feedback that led to the government's decision. The UK Green Taxonomy consultation was a key part of the UK's sustainable finance framework, but it seems that the government has chosen to prioritize other policies in its pursuit of a greener future.
[1] UK Government Announces Decision to Abandon UK Green Taxonomy, UK Sustainable Investment and Finance Association (UKSIF), July 15, 2025. [2] Mixed Feedback on UK Green Taxonomy Leads to Government Review, The Guardian, July 16, 2025. [3] Skepticism and Priorities: The End of the UK Green Taxonomy, Financial Times, July 16, 2025. [4] UK Green Taxonomy Faces Uncertain Future as Consultation Feedback Reveals Limited Support, The Telegraph, July 16, 2025.
- Given the mixed feedback and concerns about the UK Green Taxonomy's practical effectiveness, some respondents suggest a focus on transition plans, sector roadmaps, real economy policies, and economic incentives in sustainable finance instead, with the UK Sustainable Reporting Standard (UK SRS) being proposed as a more effective means of tackling greenwashing.
- Although the UK Government has decided to abandon the development of the UK Green Taxonomy, sustainable investment groups have expressed disappointment at the decision, as around 20 jurisdictions are currently operating with a government-endorsed taxonomy, and approximately 30 more are considering developing one.
- The UK's ambitions to continue as a global leader in sustainable finance remain unchanged, and the government plans to focus on alternative sustainable finance measures rather than taxonomy development, with a priority on accelerating investment into the transition to net zero and limiting greenwashing.
