Sustainable Bond Market Poised to Hold Strong at $1 Trillion in 2025 Amid Global Green Finance Push

The global sustainable bond market is expected to maintain its $1 trillion valuation over the next year, even as the composition of bond issuance undergoes notable shifts. Green bonds continue to dominate, but a rise in conventional bond allocations has slightly tempered their overall share.

According to credit rating agency S&P Global Ratings, sustainable bonds saw their share of overall bond issuance decline by 2% in 2024. The dip reflects a growing appetite for traditional bonds as investors recalibrate their portfolios in response to broader economic conditions.

Despite this shift, S&P points to a silver lining: declining interest rates could set the stage for a resurgence in sustainable bond issuance, particularly in Latin America and Asia. Emerging economies seeking to bridge the climate finance gap may turn to sustainable debt markets as a key funding mechanism.

Even with the overall dip in sustainable bond share, green bonds remain the dominant force, accounting for 60% of all sustainable debt issued in 2024. Notably, more than half of the year’s 20 most significant corporate green bond transactions came from energy companies—underscoring a deepening commitment to renewable infrastructure and decarbonization efforts.

Johann Plé, senior portfolio manager at Axa Investment Managers, highlights the European Union’s continued leadership in green finance. Under the NextGenerationEU recovery package, the bloc is on track to finance €250 billion in green bonds by 2026—a move that cements its status as a cornerstone of the global sustainable bond market.

“In Europe, only Finland, Portugal, and Greece have not issued any green debts, but Greece has referred to it as a potential instrument in its 2025 funding plan,” he says.

In December 2024, the EU launched a voluntary European green bond standard, which requires issuers to allocate at least 85 percent of their proceeds to EU taxonomy-aligned activities.

Plé does not expect the green bond market to be affected by US banks' exodus from net zero alliances, given that “the market is still largely made up of European issuers, and these banks have not withdrawn from their existing commitments.”

A decline of green bond issuance in the US should also be further contextualized, Plé argues, adding that some US issuers “don’t want to flag their green investments” and that green projects under the Inflation Reduction Act are likely to continue, given they primarily benefit Republican states.