Despite the growing backlash against ESG, and the recent withdrawal of major banks and asset managers from climate-focused initiatives, the global issuance of sustainable bonds is still expected to top US$1 trillion this year, according to Moody’s Ratings.
In a new report, the rating agency said that it expects global sustainable bond issuance to stay flat year-over-year at about US$1 trillion in 2025. That total includes US$620 billion in green bond issuance, US$175 billion in new sustainability bonds (which combine green and social goals), US$150 billion worth of social bonds, US$35 billion of sustainability-linked bonds, and US$20 billion of transition bonds.
“A continued focus on climate mitigation financing, as well as growing interest in climate adaptation and nature, will spur green and sustainability bond issuance,” it said in the report.
In particular, increased investment in clean energy is expected to drive the issuance of sustainable bonds in the year ahead.
“While we expect climate mitigation projects will remain the focus, investment drivers will evolve, leading to more issuance related to data centres, nuclear energy and emerging green technologies,” it noted. The market is also expected to diversify toward climate adaptation and nature finance, Moody’s added.
In other segments of the market, such as social bonds, issuance “will be constrained by a lack of benchmark-sized projects,” along with a decline in pandemic-related social financing, the report said.
Additionally, transition and sustainability-linked bonds “will remain niche segments as they navigate evolving market sentiment,” it noted.
That shifting market sentiment, including “heightened scrutiny of greenwashing, evolution in market standards and regulations, and a more complex environment, including political headwinds in some countries, will likely stifle growth,” Moody’s cautioned.
By region, Europe is expected to continue to lead the way in sustainable bond issuance, but the volume of transactions “may once again be flat given the maturity of the market.”
In North America, issuance will “remain muted amid a retrenchment of climate policies” under President Trump’s new administration, it noted.
Indeed, “One of the defining themes of sustainable bond issuance in 2025 will be stark differences in volumes across different regions, reflecting divergent economic and political dynamics,” the report said.