LONDON - Britain risks falling behind in the race to attract green capital if its sustainable finance legislation diverges too far from rules emerging in Europe and the United States, a group of advisers to the government warned on Thursday.

The European Union and the United States are raising the stakes with massive green subsidies and a pro-green business push, but the UK has yet to follow suit. Its green taxonomy – a guide for companies and investors on green investments – was paused in December.

To shore up its competitiveness as a global centre for green finance, the UK must ensure its green taxonomy adopts where possible the same concepts, methodologies and metrics as the EU's taxonomy, and that it advocates for harmonisation in other markets, the Green Technical Advisory Group or "GTAG" said.

GTAG is a group of experts invited by the UK Treasury to provide independent advice on the design and implementation of a UK Green Taxonomy.

"Providing investor certainty that green investment opportunities are growing and climate ambition is here to stay will be key to strengthening the UK's global offer," Ingrid Holmes, chair of GTAG, said in a statement.

Taxonomies set out conditions for labelling an economic activity as sustainable and aim to help investors channel capital towards green and sustainable investments.

But with over 30 taxonomies in development globally, the proliferation of regulation risks making it more difficult and costly for investors to invest in green assets and for companies operating in multiple markets to comply with local requirements.

To counter this, the UK should push for global harmonisation and interoperability between taxonomies to avoid further market fragmentation, increased transaction costs and greenwashing through taxonomy arbitrage, GTAG said.

This alignment should not however come at the expense of the integrity of the UK's taxonomy, said James Alexander, CEO of UK Sustainable Investment and Finance Association and GTAG member.

"We should look to align to EU where possible but remain science-based and ensure the integrity of the UK’s science based taxonomy is maintained," he said.

(Reporting by Virginia Furness in London Editing by Tommy Reggiori Wilkes and Matthew Lewis)