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Freshfields Sustainability

| 2 minutes read

First steps towards taxonomy to address greenwashing of investments in the UK

Last week, HM Treasury announced the establishment of a new independent group, the Green Technical Advisory Group (GTAG), to advise on the development and implementation of a Green Taxonomy for the UK ('the UK Taxonomy'). 

The UK Taxonomy was announced by Chancellor Rishi Sunak in November 2020 (as we explained in this blog post), and is intended to be a framework defining which investments can be classified as environmentally sustainable, which will in turn make it easier for investors, businesses and consumers to understand a firm’s impact on the environment and make sustainable financial decisions. 

In its statement announcing the GTAG, HM Treasury noted hundreds of new sustainable investment funds are coming to market each year, and that sales to UK retail investors tripled from 2019 to 2020. 

The UK Taxonomy is intended to help address concerns about greenwashing – unsubstantiated or exaggerated claims that an investment is environmentally friendly – using technical screening criteria (TSC).

The GTAG’s remit

The GTAG’s terms of reference explain that its role will be to 'provide non-binding advice to HMG on market, regulatory and scientific considerations for developing and implementing a UK Taxonomy which facilitates more informed investment decisions' including advising on:

  • a usable, practicable approach to developing the UK Taxonomy;
  • collating scientific and subject matter expertise to assist the government in determining the TSC; and
  • how the UK Taxonomy can best support the UK’s transition to net zero.

The terms of reference emphasise that the GTAG’s role is advisory, meaning that it will inform but not replace the Government’s policy development process, and that the TSC will be subject to appropriate, open consultation.


The GTAG will be chaired by the Green Finance Institute and comprised of financial and business stakeholders, taxonomy and data experts and subject matter experts from academia, NGOs, the Environment Agency and the Committee on Climate Change. The World Wildlife Fund, the Institutional Investors Group on Climate Change, the Confederation of British Industries, and the Aldersgate Group are all represented in the GTAG, along with representatives from the UN’s Principles for Responsible Investment (PRI) and the Climate Bonds Initiative.

GTAG membership will be by invitation, and will be reconsidered after the GTAG has been convened for an initial period of two years. The Government also intends to establish GTAG sub-groups to provide specific technical expertise on a given sector to assist the government in determining appropriate TSC.

Shape of the UK’s Taxonomy?

Firms will be eager to understand the extent to which the UK Taxonomy will align with the EU’s Taxonomy Regulation, as any significant divergence between the two will increase the regulatory burden on firms which offer financial products in both the EU and the UK, and could also risk undermining the goal of a consistently applied framework. The Chancellor indicated in November 2020 that the UK’s Taxonomy would be based on the scientific metrics in the EU taxonomy, but that those metrics would be reviewed to ensure that they are right for the UK market – although there was no indication in this week’s announcement as to whether that is still the intention.

In any event, UK firms will welcome clarity in this area from a risk perspective too. The potential for litigation arising out of investments marketed as sustainable is rising exponentially; investors increasingly expect firms to take a holistic approach to claims that investments are green or sustainable, and cases are starting to be brought against fund managers in Europe for misleading investors about environmental impact. To some extent, having a UK Taxonomy should help mitigate that risk by setting a common framework.

For other developments in this area, note that Emma Rachmaninov, partner in our financial services regulatory practice, will be taking part in a panel discussion 'Greening the financial services sector' on Wednesday 23 June at City Week 2021.

For the full programme, see the City Week website.


europe, sustainable finance