Green finance in 2023: Getting into gear, albeit at a lower speed 

The slightly dampened momentum we saw on green finance over the course of 2022 is unlikely to shift materially this year as governments continue to grapple with economic and inflationary pressures. The stronger focus on energy security opposed to climate action is leading to a gradual loosening of sustainability requirements. This is challenging for businesses trying to navigate the constantly changing policy and regulatory environment. 

Divergence is now a growing risk, as the UK and EU still look to continue action in key areas like climate and sustainability disclosures, but international frameworks are also being progressed in parallel. Despite a lack of momentum, businesses will be expected to navigate an increasingly fragmented landscape, avoid accusations of greenwashing and make tangible progress on their corporate environmental plans over the course of 2023. 


2022 was a challenging year for policymakers and regulators looking to accelerate the green finance agenda. The inevitable focus on energy security and rising cost has left less space for decisive action, with some high-profile initiatives appearing to drift. The key short-term impact has largely been one of delay, with political and regulatory timetables for key changes being kicked to the right.  
The long-term implications of the energy crisis are also now coming into view. We are starting to see a shift towards a bigger role for transition finance in both the UK and EU, with key reforms – such as taxonomy frameworks – being looked at again as a result. Mixed messages from policymakers have also meant that companies are becoming concerned about making long-term investment decisions that could fall foul of future changes.  

State of play 


After months of political chaos, the Government is finally starting to dust off the green finance agenda that was driven forward by Rishi Sunak when he was Chancellor. More clarity on the overarching approach is expected in the revised Green Finance Strategy, due early this year. There is an expectation that the approach should become more business-friendly, with a less prescriptive Taxonomy framework and more time for companies to adopt new rules and regulations. Further detail to guide investment decisions should come through, including on the Technical Screening Criteria (TSC) for the Taxonomy which remains important for new and emerging green technologies.  

There is also a pipeline of regulatory initiatives that are due to kick in during 2023. The FCA has now consulted on the Sustainability Disclosures Requirements regime (SDR) which will provide an integrated UK framework for disclosures on sustainability. The SDR will be launched in July, despite some continued confusion about how it will apply to corporates. The Government also remains supportive of plans to create a net zero transition framework for listed entities – with plans due to be finalised later this year. The Government will also consult on adding ESG ratings to the regulatory perimeter in Q1 to further its efforts to crack down on greenwashing.   


The EU has moved from the legislative to the implementation phase on green finance. The Corporate Sustainability Reporting Directive (CSRD) passed its last hurdle before full implementation and was approved by the plenary of the European Parliament in November. The CSRD introduces detailed, mandatory sustainability reporting for all large EU companies with more than 250 employees and will become applicable to large companies in scope as of 2024. Detailed standards are yet to be developed, with the Commission tasking the European Financial Reporting Advisory Group (EFRAG) to draft them.  

Much-needed detail for financial market participants was provided on the Sustainability Financial Disclosure Regulation (SFDR),  a regulation introduced in 2019 to improve transparency in the market for sustainable investment products – technical standards were published, laying out how financial market participants should comply with the SFDR. This led to a reclassification of investment products, due to fears about the stringency of new provisions. The EU is also planning to publish a regulation on ESG ratings in June 2023 aimed at tackling greenwashing across the EU. Finally, action will continue slowly on advancing the EU Taxonomy, with the remaining four environmental objectives of the EU Taxonomy due this year.   


There remains momentum to establish a global baseline for corporate sustainability disclosures this year, with the International Sustainability Standards Board (ISSB) due to launch two reporting standards in June 2023. There is still no consensus on their international adoption, with the EU notably aiming to promote the uptake of their EFRAG standards. Activity is also ramping up on the biodiversity agenda following the conclusion of the UN Biodiversity COP15 last December – the Taskforce for Nature-related Financial Disclosures will publish the first risk management and disclosure framework on evolving nature-related risks in September.   

But there are also challenges emerging at an international level. The Glasgow Financial Alliance for Net Zero (GFANZ) has run into serious problems, with members expressing concerns about requirements on financing coal. And in the US, while the Security and Exchange Commission (SEC) is expected to finalise rules requiring companies to disclose more information on climate risks, there is a growing backlash against sustainability disclosures given the potential cost to business.  

Implications for business 

We do not expect 2023 to be a year of radical change from 2022 on green finance. The economic and social challenges that many governments are dealing with will remain for some time. There is also a need for countries to prepare for what could be a harder winter next year, with implications for energy security and geopolitics. But we do expect to see some more evidence of delivery in 2023. The UK and EU will come forward with new and more detailed initiatives and efforts to tackle greenwashing will step up, alongside action to facilitate more transition finance.   

Businesses need to be prepared, tracking the changing policy and regulatory environment to ensure they are ahead and can implement new regimes with less warning. It will also be key to managing the most significant and growing risk – one of international divergence. The new ISSB standards are unlikely to align with national frameworks – especially in the EU – meaning businesses need to actively engage with policymakers and regulators to minimise the risk of complex and costly green finance frameworks becoming the norm.  

Josh Buckland heads Flint’s energy and climate work, having previously worked as Energy Advisor to the Secretary of State for Business, Energy and Industrial Strategy. Fiona Wright advises clients on EU political, policy, and regulatory issues, including financial services, ESG, and climate policy, and has two decades of experience in the financial services policy space. This blog post was written with input from Managers Zoe Alipranti, who advises corporates and investors on ESG and sustainability with a focus on the UK and international agendas and Lisa Keuper, who supports clients on EU political and policy developments in particular areas of financial services and fintech. 

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