Yesterday the UK's Treasury Department announced the appointment of a Green Technical Advisory Group (GTAG), set up to advise and assist the UK Government in its development and implementation of a Green Taxonomy, aimed at tackling 'greenwashing'.1 The Government's objective is that the Green Taxonomy, which will comprise technical screening criteria, will provide a common and defined set of standards and terms by which the environmental credentials of financial products can be evaluated and compared. In turn, investors will be better equipped in their decisions to support investment in sustainable projects and contribute to efforts to tackle climate change.
The Treasury announced that the GTAG will be chaired by the Green Finance Institute and made up of financial and business stakeholders, taxonomy and data experts, and subject matter experts drawn from academia, NGOs, the Environment Agency and the Committee on Climate Change. A full list of members has been published on gov.uk.2
The creation of GTAG follows a Treasury Committee report published in April, titled 'Net Zero and the Future of Green Finance'.3 That report made a series of recommendations aimed at addressing the risk of greenwashing and ensuring that consumers could readily and effectively assess the climate impact of financial products through clear and consistent labelling. It recommended that the Treasury and the UK Financial Conduct Authority (FCA) consult on requiring financial products to have clear green labels that would allow consumers to assess their relative climate impacts and make choices accordingly.
The development of a Green Taxonomy is one of many planks in the UK Government's policy agenda aimed at positioning the UK as a green financial centre and meeting its long-term environmental commitments. It is hoped that, by enabling investors to make better choices over green investment, the country's economy will become more aligned to those objectives. The Chancellor of the Exchequer first announced the Government's intention to implement a Green Taxonomy during a speech he made last November, during the course of which he stressed the UK's commitment to mandatory climate-related financial disclosures.4
Once the Green Taxonomy is finalized and published one can expect further announcements from both of the UK's joint financial regulators, the FCA and the Prudential Regulatory Authority. The Green Taxonomy will re-focus the FCA's attention in this area, following its Discussion Paper and related Feedback Paper on Climate Change and Green Finance published in 2019. Further evidence, if it was needed, that green issues remain a key focus in the regulated financial services sector.
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