The UK government has officially decided not to proceed with the development of a UK Green Taxonomy. 

The decision, announced on 15 July 2025 in a consultation response, marks a significant shift in the UK’s approach to sustainable finance, with the Government opting to focus on alternative policies to drive the green transition and combat greenwashing.

Mixed reception 

The consultation, which ran from November 2024 to February 2025, attracted 150 responses, with financial services firms and asset managers forming the largest cohort. While 45% of respondents expressed positive sentiment towards the idea of a UK Green Taxonomy, a majority of 55% were either mixed or negative. The primary concern was the expected real economy application and effectiveness of a taxonomy in light of experiences with the EU Taxonomy.

How did asset managers respond?

Responses from asset managers were especially sceptical about the distinct value a UK specific taxonomy would bring. They argued that the fundamental drivers of investment, such as risk profile, scalability, and project viability would not be altered by the introduction of a taxonomy. Instead, sector-specific roadmaps, transition plans and regulatory incentives were seen as more impactful levers for channelling investment into sustainable activities.

A significant theme among respondents within the financial services sector was the risk of regulatory fragmentation. Many firms highlighted that a UK Green Taxonomy could exacerbate the complexity and costs associated with complying with multiple, often divergent, taxonomies across jurisdictions. 

Consequentially, two thirds of respondents wanted any UK Taxonomy to be aligned with the EU Taxonomy, to the extent that the UK adopted a taxonomy.

The experience with the EU Taxonomy, which has been criticised for its complexity and limited usability, was frequently cited as a cautionary example. Respondents warned that introducing a UK specific framework could create further confusion, increase the compliance burden and potentially undermine efforts to tackle greenwashing by making it harder to compare ‘green’ activities internationally.

Despite the significant workload undertaken by many asset managers to report on their taxonomy alignment pursuant to the EU Taxonomy, the UK consultation response noted that there is inconclusive evidence that the EU Taxonomy has reduced greenwashing and there have been difficulties in measuring its impact.

Alternative policies will take priority

The consultation revealed a strong preference for prioritising other sustainable finance policies over the development of a UK Green Taxonomy. Respondents pointed to the UK Sustainability Reporting Standards (UK SRS), transition plan requirements, and sector specific decarbonisation pathways as more effective tools for both channelling capital to green activities and preventing greenwashing. We have previously written about the UK SRS in our articles: Delayed but not derailed: the UK Sustainability Reporting Standards consultation and A trio of consultations: The UK government consults on sustainability reporting requirements and transition planning. The Government’s ongoing work on sustainability disclosures, assurance of sustainability reporting, and transition plans were seen as more likely to deliver meaningful progress.

What next?

The Treasury concluded that there was no compelling evidence that a UK Green Taxonomy would deliver its intended objectives in a proportionate or effective manner. The Government acknowledged that while a taxonomy could provide some clarity and transparency, the significant challenges of design, implementation and international interoperability outweighed the potential benefits. 

Instead, the UK will concentrate on enhancing transparency and aligning existing policies to support sustainable investment and limit greenwashing, ensuring that resources are directed towards measures with the greatest real economy impact.

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For more information on what the UK Green Taxonomy is, read our previous article: The UK’s Green Taxonomy, which outlines the consultation’s aims, scope and political context.