U.K.’s Rules on Green Investing Aim to Be More Stringent Than EU

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(Bloomberg) — The U.K.’s rules to define sustainable investing will be more ambitious than the European Union’s recent effort, according to the head of the expert panel advising the government.

Ingrid Holmes, chair of the nation’s new Green Technical Advisory Group, said this planned framework will reflect the U.K.’s desire to go further and faster in its climate targets than the bloc. Building efficiency standards and the classification of energy sources such as hydrogen and natural gas are examples of areas that may require tighter thresholds in Britain, she said.

“We very much see this is an opportunity to big up ambition in the race-to-zero globally,” Holmes, an executive director at the Green Finance Institute, said in an interview. “If we can match the EU and go further, it’s a race to the top rather than the bottom.”

The advisory group will oversee a “Green Taxonomy” to define the requirements for financial investments to be deemed environmentally sustainable. The aim is to help prevent greenwashing, or exaggerated ethical claims, a growing worry for investors looking at a plethora of debt and fund products marketed as green.

Holmes is conscious of the potential costs of diverging from the EU’s rules, which could create another set of difficulties for companies with business interests across both jurisdictions in a fractious post-Brexit era. London is keen to place itself as a hub for green finance, though is likely to face competition.

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“We are going to be very mindful that any deviation potentially risks multiple data reporting requirements — we do want to work to minimize that,” Holmes said. “But equally this needs to be a taxonomy based on science and if the science says we need to go further, faster, the taxonomy needs to reflect that.”

The EU faced a push by some member states to water down its own taxonomy, and ended up excluding the controversial sectors of agriculture, natural gas and nuclear power — for now. Holmes said the U.K.’s process has the advantage of not having to satisfy the specific needs of different countries, and will also “learn lessons” from the bloc on how to best integrate lobbying interests.

The advisory panel includes representatives from the Confederation of British Industry and the Institutional Investors Group on Climate Change, as well as academics and non-governmental organizations.

“We need to have industry views represented, but we need to get an aggregate view — not having representatives from different kind of technologies, because that’s where you get in potential trouble with people lobbying for preferential treatment,” Holmes said.

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