The UK Government will discontinue plans for a standalone UK Green Taxonomy, a classification system intended to define environmentally sustainable economic activities. The move, announced on July 15, 2025, and detailed in HM Treasury’s (HMT) UK Green Taxonomy Consultation Response, follows mixed feedback from industry stakeholders and a re-evaluation of the most effective tools to drive the nation’s green transition.
The full consultation outcome is available on the GOV.UK website.
Reason for the reversal
The decision comes after a consultation launched in November 2024, which sought views on whether a UK Green Taxonomy would complement existing sustainable finance policies. While 45% of respondents expressed positive sentiments, a majority (55%) had mixed or negative views. Concerns primarily revolved around the practical application of the taxonomy, its interoperability with current UK sustainability rules, and the significant time and resources required for its maintenance.
HMT stated: “After careful consideration of the consultation responses, the government has concluded that a UK Taxonomy would not be the most effective tool to deliver the green transition and should not be part of our sustainable finance framework.” The government’s analysis of other jurisdictions’ taxonomies also contributed to the decision, concluding that maintaining a UK Taxonomy could divert energy from “other activities that are more likely to drive UK economic growth.”
Commentators react
The announcement has elicited varied reactions from commentators. Oscar Warwick Thompson, Head of Policy and Regulatory Affairs at the UK Sustainable Investment and Finance Association (UKSIF), said: “It’s disappointing that the government has concluded that a green taxonomy of green investments had no place within the UK’s sustainable financial framework.” He emphasized the desire for “swift delivery of commitments regarding transition plans and sustainability reporting standards.”
Some, however, acknowledge the practical difficulties. The consultation noted that a significant portion of respondents felt that core objectives, such as “channelling investment” and “tackling greenwashing,” could be better achieved through alternative measures like the UK Sustainability Reporting Standard (UK SRS) and mandatory transition plans.
Implications for UK financial services firms
For UK financial services firms, the abandonment of the Green Taxonomy signals a strategic shift in the government’s approach to sustainable finance. Instead of a prescriptive classification system, the focus will now be on strengthening corporate transition plans and sustainability reporting standards.
The consultation revealed that many financial institutions had negative or mixed feelings about the taxonomy, largely due to concerns over its complexity and potential for increased reporting burdens. UK Finance members strongly believed that “the introduction of additional reporting through a green taxonomy would act against the Government’s growth mission and drive up the cost of doing business in the UK.” This suggests a potential relief from anticipated compliance complexities for firms.
Recent reports also indicate a broader trend where some financial services firms are re-evaluating their emphasis on certain ESG policies. For instance, some banks have “rowed back on green policies” and reduced focus on climate targets in executive bonus schemes, as reported by City AM.
Comparisons with other countries
The UK’s decision stands in contrast to several other countries that have either implemented or are developing sustainable finance taxonomies. Globally, approximately 20 jurisdictions have operational government-endorsed taxonomies, with another 30 considering them, including major economies such as Australia, the EU, Singapore, Hong Kong, Canada, and India.
The EU Taxonomy, for example, introduced in 2020, has faced its own share of controversies, particularly regarding the inclusion of certain economic activities like nuclear energy, and has seen struggles with implementation and corporate disclosure, with less than 50% of in-scope companies fully reporting EU Taxonomy data in line with regulated templates.
More recently, on July 4, the European Commission adopted a Delegated Regulation (provisional version) scaling back EU Taxonomy reporting (see European Commission cuts back Taxonomy Reporting, with impact on US-based multinationals). The UK government’s analysis likely took these international experiences into account, aiming to avoid similar pitfalls and focus on policies deemed more effective for the UK context.
