Ahead of COP 26 in Glasgow, the UK Government has published its “Greening Finance” Roadmap, which outlines the first phase of its ambition to make the UK a leader in green finance: to encourage businesses and investors to evaluate their environmental, social and governance (ESG) issues in their financial decision-making.

By requiring companies to report against recognised global standards and best practices, the SDR and the Taxonomy will help to ensure that investors and consumers will have consistent and comparable information that they need in order to include ESG into their decision making.

The Roadmap includes two major milestones: (1) new sustainability disclosure requirements (SDR) for UK companies; and (2) the implementation of a UK Green Taxonomy (Taxonomy) –  in each case paralleling and following the EU’s efforts in this space. 

Sustainability Disclosure Requirements

The SDR is the UK’s version of the EU Sustainable Finance Disclosure Regulation, with significant modifications. It will apply to corporates (UK registered companies, including relevant financial services firms - banks and insurance companies - and UK listed companies) and will build on existing sustainability-related reporting requirements and best practices (such as the Task Force for Climate-related Financial Disclosures (TCFD) recommendations).

It is anticipated that there will be three types of disclosure under the SDR (with a staggered approach of mandatory implementation):

  • Corporate sustainability disclosures: UK registered and UK listed companies will have to: (a) make these disclosures in their annual reports using ISSB standards (defined below) and (b) report on the environmental impact against the Taxonomy.
  • Asset manager and asset owner disclosure: asset managers/owners will have to disclose how they take sustainability into account when making investment decisions and strategies; and
  • Investment product disclosure: creators of investment products will be required to set out the environmental impact of the activities they finance and show the extent to which they are taxonomy-aligned (part of a new sustainability labelling regime).


The Taxonomy is a set of criteria that certain economic activities must meet in order to count as “sustainable” in the UK, the UK’s answer to the EU’s Sustainable Finance Taxonomy (EU Taxonomy), which entered into force in 2020. Both include six environmental objectives: climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control and protection and restoration of biodiversity and ecosystems. Similar to the EU Taxonomy, an economic activity will be “Taxonomy-aligned” if it: (i) contributes substantially to one or more of the six objectives; (ii) does not significantly harm any other objective; and (iii) meets certain minimum safeguards.