The UK green taxonomy should diverge from the EU’s as little as possible, the Green Technical Advisory Group (GTAG) has recommended, despite calls elsewhere for the UK to place more weight on the science and emerging policy environment than the EU taxonomy does.
“In general, a strategy that is consistent with the EU taxonomy is likely to have fewer costs and more benefits than one which is more ambitious in some criteria and less in others,” the group said in a report on Friday.
The GTAG was established in 2021 to provide independent advice to the UK government on implementing a green taxonomy.
The UK has onshored the majority of the EU taxonomy regulation, which sets out the high-level design features of the taxonomy in the UK.
However, the delegated acts that include the technical screening criteria (TSC) – the detailed criteria for significant contribution and those for do no significant harm (DNSH) for climate change mitigation and climate change adaptation – have not been onshored as they were introduced after Brexit.
TSC
GTAG recommended the UK government adopt some of the EU TSC in the short term and then revise them later as this will focus the taxonomy’s use on investors and financial market participants.
This also means it will align closely with the EU TSC, which many firms will also be using, which should make things easier for firms.
The majority should be adopted, GTAG said, but those that don’t align with the UK’s net-zero strategy, or have significant implementation challenges, should actually be revised before adoption.
It went on to outline guidance for how to revise them, which is to follow the three principles of avoiding greenwashing and supporting economy-wide transition, being simple and usable (which includes not becoming a cost burden), and being internationally relevant and consistent.
There are more than 700 individual DNSH criteria included in the EU TSC. Many reference specific EU laws – and could therefore create issues regarding how they are applied within the UK green taxonomy as well as ensuring its interoperability with taxonomies developed outside the EU.
Therefore GTAG has been looking at a different approach, one where each do no harm criteria is examined and then amended or streamlined if needed.
Implementation
When it becomes time for the UK green taxonomy to be delivered, GTAG has recommended a two-pronged approach that supports investment into adaptation-aligned economic activities.
The first is to develop an “investment-enabling adaptation framework and policies”, which would include an overarching goal for climate change adaptation and a call to action for businesses and finance.
The second is to set up an adaptation working group to advise on the design and implementation of an enhanced set of adaptation TSC to help catalyse the investment needed to achieve resilience and deliver wider economic opportunities relating to adaptation.
“It is positive to see confirmation of the GTAG’s recommendations emphasising the importance of the taxonomy’s usability for investors, and for the UK in its initial approach to onshore the majority of the EU’s TSC to minimise the costs of divergence for firms,” said James Alexander, CEO of UK Sustainable Investment and Finance Association and ESG Clarity Committee member.
“We would like to see the GTAG’s work continue at pace with regular transparency on its advice provided to the market and other stakeholders. The government now needs to quickly restate the UK’s commitment to moving ahead with implementing a taxonomy, with further delays leaving the UK further behind the EU and other jurisdictions in its leadership on green finance.”
