Global issuance of labeled sustainable bonds, which includes categories like green, social, sustainability, sustainability-linked, and transition bonds, is predicted to reach approximately $1 trillion in 2025, as reported by Moody’s Ratings. This forecast reflects optimism despite potential political challenges stemming from changes in U.S. administration, with a sustained emphasis on sustainable development and clean energy investments anticipated to drive growth.
Achieving this target would signify the fifth consecutive year of sustainable bond issuance around the $1 trillion mark. Although issuance remained stable at this threshold in 2024, the sustainable segment lagged behind the broader bond market, with its share dropping from 15% to 11% year-over-year.
Specifically, green bonds are projected to maintain dominance in this market, with expected issuance of $620 billion in 2025, an increase from 2024 levels. Factors contributing to this growth include strong climate mitigation efforts supported by governmental policies and private sector initiatives. While political shifts in the U.S. might dampen global climate actions, investments in clean energy are anticipated to thrive in other regions, bolstering decarbonization efforts.
Moody’s suggests that there will not be a significant decline in U.S. sustainable bond issuance, as reductions in federal investment are likely to be offset by private sector contributions and support from state and local governments. However, North America has seen a sharp decrease in its share of the global sustainable bond market, with a nearly 30% drop in volumes from 2021 to $124 billion in 2024.
Key trends driving green investments identified in the report include increasing demand for energy- and water-efficient data centers and investments in nuclear energy necessary to meet low-carbon energy demands. Furthermore, there is a noticeable shift towards financing projects focused on adaptation and resilience in response to rising costs associated with extreme weather, as well as an emphasis on nature conservation to mitigate global warming.
Moody’s also anticipates a 9% decline in social bond issuance for 2025, falling to $150 billion due to a scarcity of benchmark-sized projects. Stability is expected for sustainability bonds at $175 billion, while transition bonds, following Japan’s inaugural issuance, are predicted to remain at $20 billion. Sustainability-linked bonds may grow by 14% to reach $35 billion, though they will still be below levels observed between 2021 and 2023 due to increasing scrutiny from investors regarding the credibility of their linked sustainability targets.
In summary, Moody’s Ratings emphasizes that while the global sustainable bond market is projected to hold steady at $1 trillion, various challenges—including heightened scrutiny of greenwashing and political complexities—will pose risks to its growth trajectory.