The Government has tasked a group of experts to set up a guide to what does and does not count as sustainable investment to crack down on companies trying to greenwash their activities.
A new Green Technical Advisory Group, with representatives from business, charities and academia will develop a framework – the green taxonomy – which will set the bar for sustainability.
“The green taxonomy will help clamp down on greenwashing – unsubstantiated or exaggerated claims that an investment is environmentally friendly – and make it easier for investors and consumers to understand how a firm is impacting the environment,” the Treasury said.
The group’s advice will, however, merely steer ministers’ decisions and not bind the Government to any particular path.
Hundreds of sustainable investment funds come to market every year, small investors sometimes struggle to make informed decisions, with companies using a raft of different metrics which are often difficult to compare.
“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,” said economic secretary to the Treasury, John Glen.
Last year, the European Union developed its own taxonomy which used six objectives, ranging from mitigating and adapting to climate change to controlling pollution and restoring biodiversity.
It faced some criticism for excluding nuclear power and allowing wood burning.
The UK’s Green Technical Advisory Group will include a subgroup which explores the use of hydrogen and carbon capture as well as assessing how nuclear power should fit into the taxonomy.
The group will meet for the first time this year, and run for at least two years. Its first recommendations will be provided to the Government in September.
It will be chaired by the Green Finance Institute and include members from the Confederation of British Industry, the Committee on Climate Change, the London Stock Exchange, the London School of Economics and WWF.
Energy minister Anne-Marie Trevelyan said: “This will help the financial sector invest in the projects, technologies, and services of the future, strengthening the UK’s position as global leader in green finance and tackling climate change”.