ESG has become a hot-button topic in both business and parliament over the past few years, and there will be radical developments in the year ahead.
I know from first-hand experience working at WWF and Shell before I was elected to parliament that much of the innovation and drive towards good ESG corporate policy comes from the private sector. Policymakers should, however, provide industry with a framework for good ESG, and building this framework requires direct engagement between industry, stakeholders, and parliamentarians.
It was for this reason that I founded the all-party parliamentary group (APPG) on ESG – a group of like-minded, pro-business, and ESG-focussed MPs and peers – to act as the bridge between policymakers and industry.
The ESG APPG was set up 12 months ago and has held 10 events with key players in industry, regulators, and parliamentarians coming together to discuss the future for ESG regulation in the UK. Through consultation with industry the APPG has identified three policy areas that the APPG should engage with: the government’s Green Finance Strategy, the introduction of a UK Green Taxonomy, and the possible need for a UK Social Taxonomy.
Green Finance Strategy
The new Green Finance Strategy, due to be published later this year, we hope will help to match bold government support to the massive private sector backing for both greening finance and financing green.
We need innovation, expertise and financial firepower from companies, so the Green Finance Strategy should serve to bolster firms that are already pushing for net zero and incentivise those that are not yet doing so.
Green Taxonomy
The APPG is working to ensure that the UK Green Taxonomy will be evidence-based and fit for purpose: we have already held events and contributed to discussions on the taxonomy and will continue to engage with the Green Taxonomy Advisory Group (GTAG) and other industry players to achieve these objectives.
The importance of an evidence-based taxonomy has been perfectly illustrated by the EU’s inclusion of natural gas as a “sustainable” fuel in their taxonomy – a retrograde step. We must do better: international efforts at a taxonomy, such as the EU’s, serve as a benchmark for the UK to match, but the APPG will push for the UK to beat them, and beat them we must.
Social Taxonomy
The APPG will examine the possible benefits of the introduction of a UK Social Taxonomy. Similar in scope to the green taxonomy – albeit focussing on a company’s social impact rather than their environmental one – a social taxonomy will look to clarify, classify, and make consistent businesses’ reporting on socially sustainable practices.
An important area of debate is a social taxonomy’s interaction with a green taxonomy. Tackling “blue-washing” is just as important as green-washing, so we need to ensure that the taxonomies can work in harmony to reach this goal. The APPG held an event at the start of this year to discuss this and is looking to continue and expand on these discussions going forward. Further, as with the green taxonomy, we should not blind ourselves to international developments on this: South Africa has been examining the ‘grey’ taxonomy – combining the two taxonomies – whereas the EU and UK seem to be on track to create two separate taxonomies.
The APPG will continue to use international taxonomies as a learning tool to formulate our own. Crucially, no country has implemented a social taxonomy yet. We must steal a march on our competitors by seizing the opportunity to be the first in the world to introduce a social taxonomy.
Engagement with industry is the only route to robust and effective ESG policy. It is my responsibility as the APPG’s chair to ensure we promote good ESG practices in the UK and I look forward to working, over the next year and beyond, towards cementing the UK’s place as the home of ESG.
