By Virginia Furness
LONDON (Reuters) -Britain on Tuesday ditched plans to release a “taxonomy” for guiding companies and investors on what is a green investment, the latest sign governments are stalling on sustainability reporting requirements for companies.
Taxonomies set out conditions for labelling an activity sustainable to help economies meet net zero targets. They were designed to drive more investment to green projects but critics say they are burdensome to comply with and not that useful in practice.
The finance ministry said it would focus on other green policies to drive investment, after finding the taxonomy “would not be the most effective tool to deliver the green transition and should not be part of our sustainable finance framework.”
The decision comes as Europe undertakes a major overhaul of its own sustainability reporting rules for companies in a bid to slash red tape and bolster competitiveness.
The government said its consultation showed that the taxonomy would not deliver, “in a proportionate way”, its objectives of channeling capital and reducing greenwashing
The UK Sustainable Investment and Finance Association said it was “disappointing” the government had concluded that a green taxonomy had no place in the UK’s sustainable finance framework.
“We now want to see swift delivery of commitments on transition plans and the sustainability reporting standards,” UKSIF head of policy and regulatory affairs Oscar Warwick Thompson said.
Britain first mooted plans to develop a taxonomy in 2020, but work was paused in December 2022 with the then-government saying it was a complex exercise linked to multiple sectors of the economy.
Gemma Woodward, head of responsible investment at wealth manager Quilter Cheviot, welcomed the decision, saying the industry was already contending with other regulations.
(Reporting by Virginia Furness; Editing by Tommy Reggiori Wilkes, Alexandra Hudson)
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