Green Finance — UK Guide (2026)

Green finance refers to financial products, services and capital flows that support environmentally sustainable activities — including green bonds, sustainability-linked loans, transition bonds, renewable energy project finance, climate-aligned investment funds, and green mortgages.

Many sustainability consultants specialise in green finance advisory and disclosure requirements.

In the UK, green finance also covers the regulatory wrapper: FCA SDR (Sustainability Disclosure Requirements) for investment products, UK SRS S2 climate disclosure for listed issuers, PCAF financed emissions for banks and asset managers, and the new UK ESG ratings regulation.

The UK Green Finance Strategy is the UK Government policy framework for aligning UK financial services with the transition to net zero.

Originally published in 2019 and refreshed in 2023, the Strategy commits the UK to becoming the world's first net-zero-aligned financial centre.

It anchors the FCA SDR regime, the UK SRS S2 disclosure standard, PCAF financed-emissions alignment, transition-plan disclosure expectations, and the UK ESG ratings regulation.

No. HM Treasury announced on 15 July 2025 that the UK Government would not proceed with a UK Green Taxonomy, pivoting instead to disclosure standards (UK SRS), ESG ratings regulation, and transition plan requirements 1.

The UK approach differs from the EU's binding Taxonomy Regulation, which classifies environmentally sustainable economic activities for use by financial market participants and CSRD-reporting companies.

See the UK Green Taxonomy detail.

FCA SDR is the UK regulatory regime for sustainability-related investment products and asset managers.

It comprises:

(1) the anti-greenwashing rule, ESG 4.3.1R — made 28 November 2023, applying from 31 May 2024, and binding all FCA-authorised firms: any reference to a product's or service's sustainability characteristics must be consistent with those characteristics and fair, clear and not misleading. It reaches products and services, not claims a firm makes about itself. (2) Four sustainability investment labels (Sustainability Focus, Improvers, Impact, Mixed Goals) — ESG 4.1.1R(1) is drafted as a prohibition, with a carve-out letting qualifying managers use one from 31 July 2024. (3) Naming-and-marketing rules, longstop 2 December 2024, restricting thirteen terms in a retail product's name or financial promotion — unlabelled products may still use ten of them on the ESG 4.3.5R conditions, and only “sustainable”, “sustainability” and “impact” are label-gated in a product name. (4) Disclosures — the entity-level report is the fixed calendar duty (2 December 2025 for enhanced-SMCR managers, 2 December 2026 for others with £5bn or more under management), while the product-level report runs 16 months from first use of a label or restricted term rather than from a date 2.

The Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025 was signed into law on 15 December 2025.

It introduces the UK's first regulatory regime for ESG ratings providers — bringing them within the FCA's regulatory perimeter 3.

Providing an ESG rating becomes a regulated activity on 29 June 2028— article 2(3) of the Order commences the substantive provisions on that day, and until then they are in force for FCA rule-making and application purposes only. Needing authorisation is the consequence of that, not the rule's own words.

FCA rules were consulted on in CP25/34, which closed on 31 March 2026; the FCA plans a Policy Statement with final rules in Q4 2026, and none had been published as at August 2026. Today MSCI, Sustainalytics and their peers are unregulated private opinions in the UK.

The EU's ESG Ratings Regulation (Regulation (EU) 2024/3005) has applied since 2 July 2026, with existing providers required to notify ESMA by 2 August 2026 and apply within four months. The two regimes are not parallel and should not be written in the same tense.

PCAF (Partnership for Carbon Accounting Financials) is the global standard for measuring and disclosing financed emissions — the Scope 3 Category 15 emissions of banks, asset managers and insurers attributable to their loans and investments.

GHG Protocol conformance attaches to PCAF's first edition of November 2020 only: PCAF states that the second-edition additions and everything new in the December 2025 edition have not been reviewed by the GHG Protocol. And PCAF is mandated nowhere — it appears nowhere in the FCA Handbook, and UK SRS S2 ¶B61 asks for absolute gross financed emissions, the AUM covered and the methodology used without prescribing one. The December 2025 targeted amendments to IFRS S2are the ISSB's, absorbed into UK SRS S2 rather than authored by the UK. PCAF's data-quality scale runs the opposite way to CDP's: 1 is best, 5 worst.

See UK SRS Scope 3 reporting.

A sustainability-linked loan (SLL) is a corporate loan with pricing or other terms tied to the borrower's achievement of agreed sustainability performance targets (SPTs).

Typical SPTs include Scope 1 + 2 emission reductions, science-based targets validation, water use, or workforce diversity metrics.

SLLs differ from green loans, where loan proceeds must be used for specifically green projects (use-of-proceeds basis); SLLs allow general corporate use with performance-based pricing.

Three key 2026 developments.

First, the FCA's UK SRS S2 Policy Statement is expected autumn 2026, with proposed mandatory listed-company climate disclosure from 1 January 2027 under CP26/5 4.

Second, the FCA's ESG ratings consultation CP25/34 closed on 31 March 2026, with a Policy Statement planned for Q4 2026; providing an ESG rating becomes a regulated activity on 29 June 2028.

Third, the EU's ESG Ratings Regulation (Regulation (EU) 2024/3005) has applied since 2 July 2026, and existing providers had to notify ESMA by 2 August 2026 — so a UK group with EU exposure is already inside a live regime there while the UK one is nearly two years away. They are not parallel: the EU's is a standalone Regulation supervised by ESMA directly; the UK's works through the FCA's FSMA perimeter.

ESG 4.3.1R was made on 28 November 2023 and applies from 31 May 2024 under ESG TP 1.8R. The two dates are different and should not be merged.

ESG 3.1.2R(1) applies it to all firms, and 4.3.1R(2) requires that any reference to the sustainability characteristics of a product or service is both consistent with those characteristics and fair, clear and not misleading. Four limits: excluded communications and third-party prospectuses are carved out on the face of 4.3.1R(1)(b); it reaches products and services, not claims a firm makes about itself, which FG24/3 ¶2.15 points to the Principles, the Consumer Duty, the CMA Green Claims Code and the ASA; both limbs need a UK client or a UK recipient; and it binds FCA-authorised firms only.

The rule applies whether or not the firm offers SDR-labelled products. FG24/3, the FCA's guidance on it, is non-Handbook guidance and says it “does not create new obligations for firms” — note also that the FCA's own climate hub page miscites it as FG24/2, which is mortgage-borrower guidance.

Failure to comply can lead to FCA enforcement action.

See FCA SDR + anti-greenwashing detail.