On 15 July 2025, HM Treasury published its response confirming it will no longer pursue a UK green taxonomy – a classification system to define which economic activities could be considered environmentally sustainable (the “UK Green Taxonomy”).
Instead, the UK government is focusing on existing and emerging policies such as the UK Sustainability Reporting Standards (including the open consultation on the proposed UK version of the ISSB standards) (the “UK SRS”) and transition plans to support reducing greenhouse gas emissions.
This alert outlines the end of the UK Green Taxonomy and the growing policy and regulatory focus on transition plans.
UK Green Taxonomy discontinued
Following a mixed response to the November 2024 consultation on the UK Green Taxonomy, in which 55% of respondents expressed neutral or negative views, HM Treasury concluded that a UK Green Taxonomy is not the most effective tool to support the transition to a low carbon economy. As a result, the UK government has now announced it will not be included in the UK’s sustainable finance framework.
Key concerns included:
- the resource-intensive nature of taxonomy development, as seen with the European Union’s experience;
- interoperability challenges with international frameworks, again as identified with regards to the European Union’s Taxonomy Regulation; and
- a preference for more flexible and impactful tools, such as transition plans and sustainability reporting standards.
After several years of exploration, the UK Green Taxonomy has now been formally discontinued.
Transition plans take priority
Despite the final demise of the UK Green Taxonomy, the UK government is committed to advancing a range of sustainability-related measures. One such measure, is with regards to transition plans. On 25 June 2025, the Department for Energy Security and Net Zero launched a consultation on mandating UK-regulated financial institutions, including banks, asset managers, pension funds, and insurers, as well as FTSE 100 companies, to develop and disclose credible, decision-useful transition plans aligned with the 1.5°C goal of the Paris Agreement.
The consultation aims to explore how such plans can:
- support an orderly transition to net zero;
- enhance transparency for investors; and
- strengthen the UK’s competitiveness in sustainable finance.
Key areas of focus include:
- the use of disclosure frameworks such as the Transition Plan Taskforce (“TPT”) and the UK SRS;
- implementation options, including mandatory plan development and reporting, potentially on a three-year cycle;
- alignment with net zero by 2050, climate resilience, and nature-positive strategies; and
- consideration of legal risks and international interoperability.
This is certainly an uptick in expectations, and pro-climate stakeholders are likely to welcome the development, having previously criticized the Taskforce on Climate-related Financial Disclosures ("TCFD") recommendations. These recommendations, implemented by the Financial Conduct Authority (the “FCA”), required UK-regulated financial institutions and premium listed companies to disclose whether they had a transition plan, but did not mandate having one or adhering to any specific standards.
The consultation closes on 17 September 2025.
FCA’s Role and Upcoming Developments
The FCA is expected to launch a separate consultation later in 2025 to integrate transition plan disclosures into its Sustainability Disclosure Requirements (“SDR”), as well as their sustainable fund labelling regime, further supporting the implementation of transition plans across the financial sector.
Next Steps
To prepare for this shift in regulatory focus, the following actions can be considered:
- review the government consultation and consider submitting feedback before the 17 September deadline;
- assess internal readiness to develop credible, decision-useful transition plans aligned with the TPT and UK SRS frameworks, if likely to be in scope or, alternatively, are likely to have requirements imposed through stakeholder relationships;
- monitor the outcome of the UK SRS consultation on the UK adoption of ISSB Standards, which will shape future sustainability reporting obligations; and
- track the FCA’s upcoming consultation on integrating transition plans into the SDR and fund labelling regime.
For further information, please reach out to ukreg@proskauer.com.