HM Treasury has set up an independent advisory group to oversee the delivery of the UK Green Taxonomy and help tackle greenwashing.
In line with the UK government’s net zero ambitions, the Green Technical Advisory Group (GTAG) has been established to set the bar on which investments can be defined as environmentally sustainable.
The government announcement said as hundreds of sustainable investment funds are brought to the UK market every year and inflows continue to favour these strategies, action needs to be taken to ensure investors and consumers are able to make informed decisions on the products they are researching or using.
John Glen, economic secretary to the Treasury, said: “We want investors and businesses to play their part in greening our economy and transitioning to net zero, so it’s crucial we have a clear common definition of what green means.
“A UK green taxonomy will provide better data on the environmental impact of firms, supporting investors, businesses and consumers to make green financial decisions and accelerating the transition to net zero.
“I look forward to receiving the advice of the expert Green Technical Advisory Group as we put in place a rigorous taxonomy that works for the UK and sets a high standard globally.”
The GTAG is chaired by the Green Finance Institute’s executive director Ingrid Holmes and the rest of the team is made up of financial and business stakeholders, taxonomy and data experts including James Alexander, CEO of UK Sustainable Investment and Finance Association and ESG Clarity editorial panellist, the Institutional Investors Group on Climate Change CEO Faith Ward, Alyssa Heath from the Principles for Responsible Investment (PRI), Prashant Vaze from the Climate Bonds Initiative and more.
Subject matter experts from academia – including Centre for Greening Finance and Investment’s Ben Caldecott – as well as NGOs, the Environment Agency and the Committee on Climate Change will also contribute. The full list of GTAG members can be viewed here.
The government is also creating an Energy Working Group as part of the GTAG to provide advice on key technologies such as hydrogen, carbon capture, utilisation and storage, and how to address nuclear power in the taxonomy – a key element of the UK’s net-zero plans. It will also explore the possibility of other expert groups as work progresses.
Moira O’Neill, head of personal finance at UK platform interactive investor, said it has been very difficult for the ordinary retail investor to distinguish “between truly, madly, deeply green and simply washed.”
“That’s where the industry has a huge job to educate in simple terms, so that all investors can find a path through the jargon to the investments that fit best with their principles.
“It seems that picking through what truly is ‘green’ is a tough ask even for the fund management industry. Earlier this month, the Investment Association called on the G7 to implement mandatory climate-related risk reporting for companies against a standardised set of principles. This is hugely important work and underlines the scale of the challenge.”
However, she added the investment management industry “hasn’t always been on the front foot on this issue” and although the independent taskforce is “hugely welcome” no fund management groups are listed as involved with the GTAG.
There have been a significant number of announcements relating to climate change from the UK government. It will be the first G7 country to mandate climate reporting with pension schemes adopting the Taskforce for Climate-related Financial Disclosures (TCFD) this summer, when the first UK sovereign green bond will also be issued. Prime minister Boris Johnson also announced a £12bn 10-point plan to combat climate change and biodiversity loss in November.
Josh Kendall, head of responsible investment research and stewardship at Insight Investment, also welcomed the group to support investors in their engagement and reporting activities by guiding and standardising issuer disclosure. He said he would like to see the creation of a “transparent and accessible model which complements and is aligned with the existing EU framework”.
“It needs to be designed for the investment community and reflect the complexities of asset management,” he said.
“Oversimplifying sustainability factors across asset classes is a potential problem that should be avoided. Fixed income, for example, is a complex asset class and we need an open dialogue with the new group to ensure the resulting taxonomy reflects the investment opportunities and challenges not fully captured by other frameworks. A supportive framework could also help foster future issuance of green gilts and encourage UK corporates to issue impact bonds”.