The UK government should look at setting up a regulatory or advisory body to monitor firms’ adherence with the green taxonomy, according to recommendations in the final paper from the Green Technical Advisory Group (GTAG).
Published in the final ahead of the taxonomy’s release, the final paper urges the government to consider governance arrangements and statutes for decision making powers to support the implementation and development of the taxonomy.
Originally scheduled for implementation by the end of 2022, an update on the consultation for the taxonomy is now expected in Autumn 2023, with GTAG saying that an additional 21 taxonomies have been announced or come into force globally in the time since they were established to advise on the UK’s plans in 2021. There are now 47 in play across the world.
Recognising the ever-changing landscape, GTAG said the “considered approach” the government has taken to delivering a green taxonomy in the UK will bring benefits as it learns from the efforts of those implementing taxonomies in other regions.
But Ingrid Holmes, CEO of GTAG, warned in her closing statement: “The need to deploy capital as efficiently as possible in the race to net zero and nature recovery has never been as great it is now – a taxonomy can provide vital clarity and certainty on where this capital should be invested.”
According to Holmes, GTAG’s membership “remain convinced of the need for a usable and scientifically robust green taxonomy, aligned to the UK’s net zero investment and wider environmental needs, within the increasingly busy disclosures landscape”.
“Designed well, it could become an invaluable transparency tool, helping to ensure the integrity of disclosures and enabling reporting on objective measures of environmental sustainability.”
In the paper, GTAG makes the case for enduring governance arrangements for the UK green taxonomy and lays out the options for achieving this, concluding the least regrets option would be for the government to establish an advisory body to support implementation in the short term.
This could be achieved either by providing additional funding and responsibilities to an existing body, such as the Financial Reporting Council, or creating a new entity. Voluntary and mandatory approaches to disclosure could both be supported in this way, alongside mandatory disclosures via either route to final implementation.
GTAG further recommends that in parallel, preparing for the medium term, the government should initiate the process of legislating for long-term statutory decision-making powers. Again, this could be through granting powers and financial support to an existing body or creating a new organisation.
“GTAG’s membership are now waiting for the government’s consultation with great anticipation,” concluded Holmes.
UKSIF CEO James Alexander commented on the final paper: “Through its recommendations papers over the last two years, the Green Technical Advisory Group (GTAG) has highlighted to government how a ‘green taxonomy’ in the UK could help better enable investors and businesses to make the investments in the sustainable economy that are needed if the UK is to meet net-zero. We welcome today’s final recommendations published by the GTAG advising government to consider an ‘institutional home’ to oversee and support the long-term implementation of the taxonomy.
“It is now vital that the government brings forward its green taxonomy consultation without further delay, with clear timelines set out for how and when it will be implemented.”