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Investor groups call on UK to exclude natural gas from 'green taxonomy'

·2-min read
Flames come out of a domestic gas ring of an oven in Durham, Britain, September 23, 2021.

By Juliette Portala

(Reuters) - The heads of three investor groups urged British Prime Minister Boris Johnson to exclude natural gas from the country's "green taxonomy" or risk undermining its scientific credibility, in a letter on Tuesday.

Britain is among countries looking to better define what activities are climate-friendly through such a list, to help steer private capital towards those supporting its target to get to net-zero greenhouse gas emissions.

While it is set to base its rulebook on existing frameworks, including that of the European Union, the bloc's own sustainable finance taxonomy has drawn criticism since Brussels proposed in February to label investments in some gas and nuclear power plants as sustainable.

In their joint letter, the chief executive officers of The Institutional Investors Group on Climate Change, Principles for Responsible Investment and UK Sustainable Investment and Finance Association expressed "serious concerns" following media reports that the British government could take the same path.

"The UK's taxonomy must be based purely on science and aligned with a net-zero carbon emissions future," the three CEOs wrote. "Its credibility must not be undermined by lobbying and political expediency."

Pressure to take a softer line on gas has increased following Russia's invasion of Ukraine, which has sent prices soaring and made Britain and other countries more concerned about energy security.

Regulator Ofgem also warned that Britons' household energy bills looked set to surge by another 40% in October, deepening a cost-of-living crisis that is piling pressure on the government to do more to help the poorest.

In an effort to boost domestic energy output, Britain's regulator recently approved a revised plan from Shell to develop a North Sea natural gas field.

Despite this, and whilst acknowledging natural gas may be necessary as a "bridge" fuel during the transition, the investor groups' CEOs stressed that short-term considerations on energy security must not be conflated with the taxonomy.

"Excluding natural gas from the taxonomy will not deprive gas-related activities from funding in the capital markets," they said.

(Reporting by Juliette Portala, editing by Simon Jessop and Ed Osmond)

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