Global Sustainable Bond Issuance Forecast to Reach $1 Trillion Again in 2025

Moody’s Ratings has projected global issuance of labeled sustainable bonds to remain steady at approximately $1 trillion in 2025. This marks the fifth consecutive year at this level, as political headwinds from the new U.S. administration are expected to be offset by ongoing sustainable development initiatives, increased investments in clean energy, and growth in climate adaptation and nature-focused projects.

While sustainable bond issuance in 2024 held steady at $1 trillion, the sector underperformed relative to the broader bond market, with its share of global issuance dropping to 11% from 15% in 2023.

Green bonds are forecast to lead the market in 2025, with record issuance of $620 billion, slightly up from 2024. Key drivers include climate mitigation policies, private sector commitments, and cost reductions in clean energy technologies. Despite potential slowdowns in global climate action due to reduced U.S. federal support, Moody’s expects clean energy investments to continue in other regions, bolstered by energy security and decarbonization initiatives.

The U.S. sustainable bond market is anticipated to remain relatively stable in 2025, with private sector investments and state-level initiatives compensating for decreased federal involvement. However, North America’s share of the global sustainable bond market has significantly declined, with volumes reaching only $124 billion in 2024—a nearly 30% drop from 2021.

Emerging Trends in Sustainable Investments

Moody’s highlighted several themes driving green investments:

– Energy- and water-efficient data centers: Increased demand for financing data centers with low carbon energy needs, including investments in nuclear energy and emerging green technologies for industrial decarbonization.
– Adaptation and resilience projects: As the costs of extreme weather events rise, green bond issuance is diversifying to fund projects focused on climate adaptation and resilience.
– Nature-related investments: Growing attention to ecosystem and biodiversity conservation is driving projects aimed at mitigating global warming impacts. Such projects accounted for 23% of green and sustainability bond proceeds in 2024.

Other Sustainable Bond Categories

– Social Bonds: Issuance is expected to decline by 9% to $150 billion in 2025 due to a lack of large-scale projects.
– Sustainability Bonds: Combining green and social projects, issuance is anticipated to remain stable at $175 billion.
– Transition Bonds: Following Japan’s $11 billion inaugural issuance in 2024, volumes are forecast to remain flat at $20 billion, with potential for growth as other issuers enter the market.
– Sustainability-Linked Bonds: Projected to grow by 14% to $35 billion, though still below 2021-2023 levels due to ongoing investor scrutiny over the robustness of linked sustainability targets.

Moody’s commented on the complex dynamics influencing the market: “Global focus on sustainable development and investment will support the market. But various deterrents, 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.”