GTAG recommends clarifying 'do no significant harm' rules in UK Green Taxonomy

The Green Technical Advisory Group, led by the Green Finance Institute, released recommendations to reduce ambiguity in the 'do no significant harm' (DNSH) criteria within the UK Green Taxonomy. The work highlights interoperability and usability challenges in green taxonomies that Indian regulators developing sustainable-finance classification frameworks can learn from.

The Green Technical Advisory Group (GTAG), led by the Green Finance Institute, released its third report recommending improvements to the 'do no significant harm' (DNSH) criteria within the UK Green Taxonomy. DNSH, introduced by EU regulators under the SFDR and the Taxonomy Regulation, requires that an economic activity contribute to one of six environmental objectives, do no significant harm to the others, and comply with minimum safeguards. GTAG cited inconsistent, repetitive, and ambiguous drafting and a lack of clarity on definitions such as 'significant harm', noting earlier analysis showed DNSH could significantly reduce the number of eligible entities.

The recommendations affect financial and non-financial firms expected to use the UK Green Taxonomy, along with investors relying on taxonomy-aligned disclosures. For India, where sustainable-finance taxonomy work is underway, the report is instructive for regulators and financial institutions designing classification criteria. Indian banks, asset managers, and corporates that may eventually report against a domestic taxonomy can note GTAG's concerns about ambiguous DNSH drafting and the risk of overly restrictive criteria limiting eligible green activities.

GTAG proposed clarifying the context, purpose, approach, and definition of DNSH; establishing functional design parameters and streamlining text for consistency; moving away from binary DNSH reporting toward graduated disclosure of the extent to which criteria are met; and promoting the approach for international interoperability between taxonomies. Indian policymakers and financial institutions should monitor how the UK incorporates these recommendations and consider similar usability and interoperability principles, leveraging forums such as the International Platform on Sustainable Finance, when shaping domestic taxonomy criteria.

Key figure — Environmental objectives: six, established under the EU Taxonomy Regulation