At her Mansion House speech in November, Rachel Reeves, the UK's chancellor of the exchequer, said that it was her government’s ambition to “deliver a world leading sustainable finance framework”.
This struck a familiar tone. Rishi Sunak had promised similar things when he had Reeves’s job four years earlier, one being the deliverance of a green taxonomy.
After numerous — and probably predictable — set-backs, the UK still has no taxonomy. But it should.
The Treasury launched a "value case" consultation into a UK green taxonomy, shortly before Reeves’s speech, which ended last week. The government will now take its findings and decide whether to move forward with the policy.
The report set out the already obvious pros and cons of having a taxonomy. You only have to look at the EU's pioneering version to see that they can be complex, opaque and controversial.
The UK should still take the plunge and establish its own.
The SSA sterling ESG-labelled bond market is lagging those in other currencies. Issuers often see Swiss francs or Australian dollars as more viable options.
This is in part because investors need to be told what they can buy — there is a lack of top-down guidance in the UK market that other markets have.
Sure, a green taxonomy would be complicated and people will complain about what is in it and what isn't. But perfection must not be the enemy of the good. It is better to struggle and improve than to give up.
A taxonomy would help the government set the tone and the tempo on the UK’s green transition.
It will help form long-term agendas for financial markets and will create incentives for financial institutions to strive towards science-based targets they would not have otherwise set.
It can also change as our understanding of the problem changes.
This is not a simple policy and our understanding of how to implement it is flawed. But not moving ahead for a fear of bureaucracy would be an uninspiring approach to becoming a world leader in sustainable finance.