On Tuesday, the United Kingdom (UK) government announced that it was abandoning its prior plans to implement its own taxonomy of sustainable activities, similar to that established by the European Union (EU). The finance ministry argued in its press release on the consultation process’ conclusion that the policy “would not be the most effective tool to deliver the green transition and should not be part of our sustainable finance framework” and that they will continue to pursue clean energy and other environmental targets through other means.
These taxonomies were designed to drive investment in “green” projects by labelling certain activities as “sustainable” through evidence-based classification. However, critics argue that these frameworks can be overly burdensome for companies and are not practical.
UK’s green Taxonomy – the timeline
- 2020
UK Chancellor of the Exchequer, Rishi Sunak, proposed several sustainable finance measures, including a green taxonomy to provide a common framework for understanding economic activities in the transition to a more sustainable economy and meet environmental targets. - 2021
The Green Technical Advisory Group (GTAG) was launched to advise the government on implementing the taxonomy and published its first updates later that year, recommending alignment with the EU Taxonomy but tailored to UK priorities. - 2022
In late 2022, the government announced that it was struggling to develop the secondary legislation due to its complexity and a lack of regulatory bandwidth to adequately consider all relevant sectors. - 2024-25
The consultation was open for twelve weeks, from mid-November of 2024 until early-February of 2025. They received only 150 responses, with the largest group (59) coming from the financial services sector. Trade bodies also represented a large input (57), but other sectors also offered feedback.
Only about 45% of respondents had a favourable view of the taxonomy, with 55% holding a mixed or negative view. Many cited concerns over “the real-world application” while others argued that other elements of the sustainable finance framework should take priority.
- 2025
The government decided, based on the consultation results, to drop its efforts to develop the green taxonomy, proposing to focus on other avenues toward its environmental targets.
Reactions
Reactions to the decision are mixed. The UK Sustainable Investment and Finance Association deemed it “disappointing” to omit the green taxonomy from the broader UK sustainable finance framework. Their head of policy and regulatory affairs, Oscar Warwick Thompson, stated, “We now want to see swift delivery of commitments on transition plans and the sustainability reporting standards.” Meanwhile, head of responsible investment at wealth manager Quilter Cheviot, Gemma Woodward, was relieved by the decision, claiming that the industry is already overwhelmed by other legislation.
Conclusion
It remains to be seen what the next steps are for sustainable finance in the UK, but this decision comes as the EU is also simplifying its Taxonomy, among other elements of the EU Green Deal earlier this year.
Sources:
– Britain scraps ‘taxonomy’ plan for green investments. (July 2025). Virginia Furness for Reuters.
– Consultation Outcome: UK Green Taxonomy. (July 2025). UK Government.
– Green Technical Advisory Group issues first recommendations to UK government on the Green Taxonomy. (October 2021). Raza Naeem, Victoria Hickman, and Stephen Clipsham for Linklaters.
– New amendments simplify EU Taxonomy. (July 2025). Jan A. Müller for KPMG.
– New independent group to help tackle ‘greenwashing’. (June 2021). UK Government.
– The UK Green Taxonomy. (January 2023). KPMG.
– UK Becomes First Country in the World to Make TCFD-aligned Disclosure Mandatory. (November 2020). Mark Segal for ESG Today.
– UK Drops Plans for Sustainable Finance Taxonomy. (July 2025). Mark Segal for ESG Today.
– UK Green Taxonomy Consultation Response. (July 2025). UK Treasury.
– UK Green Taxonomy Dies As Sustainability Regulations Face Global Pushback. (July 2025). Jon McGowan for Forbes.
