Global issuance of sustainable bonds will remain steady at around $1 trillion in 2025, marking the fifth consecutive year at this level, according to Moody Ratings. Despite political shifts and heightened scrutiny, the sustainable bond market continues to be driven by a growing global focus on sustainable development, clean energy investments, and climate adaptation. 

Green Bonds: Leading the Charge in Powering the Clean Energy Revolution

Green bonds are anticipated to dominate the sustainable bond market in 2025. Their issuance is projected to reach a record $620 billion, slightly surpassing 2024 levels, per Moody’s analysis. 

These bonds, primarily focused on climate mitigation, will benefit from policy support, private sector commitments, and declining costs in clean energy technologies. Additionally, there’s a growing shift towards financing adaptation projects, as the economic and human costs of extreme weather rise. 

Investments in energy- and water-efficient data centers, nuclear energy projects, and emerging green technologies for hard-to-abate sectors could bolster green bond volumes further.

Nature-related projects are also gaining traction, driven by an increasing emphasis on ecosystem conservation and biodiversity to combat global warming. In 2024, around 23% of green and sustainability bond proceeds were allocated to adaptation and nature-related projects. This trend is expected to grow in 2025.

Social and Sustainability Bonds: Mixed Outlook

Social bond issuance will decline by 9% in 2025 to $150 billion. This decrease is due to a lack of benchmark-sized projects and reduced pandemic-related social financing. 

However, social bond volumes remain significantly higher than pre-pandemic levels, indicating a sustained interest in financing social initiatives.

Sustainability bonds, which fund a mix of green and social projects, could remain stable at $175 billion. This segment has shown steady growth over the past decade, supported by a diversified issuer base.

Transition and Sustainability-Linked Bonds: Niche Markets

Transition bonds, which debuted in 2024 with Japan’s $11 billion issuance, will remain flat at $20 billion in 2025. While Japan currently dominates this segment, there’s potential for gradual diversification as more issuers adopt transition finance strategies to achieve low-carbon goals.

Sustainability-linked bonds (SLBs) could also grow by 14% to $35 billion this year. However, this remains well below the $80 billion annual average seen between 2021 and 2023. 

Investor scrutiny over the credibility and robustness of SLB targets continues to limit their growth. However, SLBs provide an alternative for issuers without significant near-term capital investment needs for green or social projects.

Regional Trends: A Tale of Diverging Markets

The sustainable bond market in 2025 will reflect varying regional dynamics shaped by political, economic, and regulatory factors. The chart below shows the varying issuance trends across regions. 

• RELATED: EU’s Green Bonds to Slash 55 MTS of CO₂ Annually. Can it Hit Europe’s 2050 Net Zero Target?

1. Europe: As the leading region for sustainable bond issuance since 2017, Europe will maintain its dominance with projected volumes of $465 billion in 2025. The implementation of the European Green Bond Standard in late 2024 may spur growth.
2. Asia-Pacific (APAC): APAC’s sustainable bond issuance is forecasted at $238 billion, slightly below 2024 levels. Transition finance remains a key focus, supported by government initiatives and sustainable finance policies across the region.
3. North America: Sustainable bond issuance in North America will remain muted, with 2024 volumes totaling $124 billion, a 30% decline from 2021. In the U.S., reduced federal investment in clean energy under the new administration is partially offset by private-sector initiatives and state-level efforts.
4. Latin America and the Caribbean: Issuance could rebound in 2025, driven by COP30 in Brazil and increased activity from regional issuers. Large sovereign issuances and the momentum from the COP summit will boost volumes.
5. Middle East and Africa: While accounting for the smallest share of sustainable bond issuance, the region’s focus on clean energy investments and carbon transition risks could support long-term growth.

Climate Financing: Accelerating the Green Transition

Climate financing will play a crucial role in addressing global energy needs and accelerating the green transition. In 2025, policy support, private-sector pledges, and declining costs of clean energy technologies will continue to drive climate investments. Despite potential setbacks, such as the U.S. election’s impact on global climate action, many nations are moving forward to meet decarbonization and energy security objectives.

• MUST READ: Climate Tech VC Investments Drop for the 3rd Year in a Row, AI to the Rescue

China and the EU, accounting for 66% of global clean energy investment in 2024, are leading the charge. Their industrial policies are heavily focused on renewable power, energy efficiency, and low-emissions technologies. 

This momentum is spurring a surge in sustainable bond issuance, particularly green and sustainability bonds aimed at climate mitigation projects. These include renewable energy, clean transportation, and green buildings. Together they make up nearly half of the eligible categories covered by Moody’s second-party opinions over the past two years.

Yet, emerging markets (EMs) face significant climate finance challenges, with annual funding needs exceeding $1 trillion. In 2024, sustainable bond issuance from EMs declined by 8% to $145 billion. 

However, increased climate investments from advanced economies, multilateral development banks, and innovative financing solutions could drive a rebound in EM sustainable bond issuance in 2025.

Emerging technologies in hard-to-abate sectors, such as steel, cement, and aviation, are also influencing sustainable bond frameworks. Furthermore, adaptation and nature-related financing are scaling up, driven by rising climate risks and biodiversity conservation goals. 

• In 2024, adaptation and nature-related bond proceeds reached annual records of $73 billion and $113 billion, respectively. This accounted for 23% of green and sustainability bond proceeds.

Unlocking More Bonds for a Greener Future

As more public and private issuers embrace adaptation and resilience projects, sustainable bond frameworks are expanding. For instance, the Netherlands’ green bond framework funds long-term flood management strategies. 

Similarly, U.S. utilities are investing in grid resilience to address wildfire risks, integrating these initiatives into their bond frameworks. Nature-focused financing is also gaining ground, with blue bonds supporting marine and coastal projects, such as kelp forest cultivation for carbon sequestration.

The sustainable bond market in 2025 is up for another year of steady issuance at $1 trillion, reflecting its maturity and resilience amid challenges. Green bonds will continue to lead the market, supported by climate mitigation and adaptation initiatives. As the market evolves, addressing concerns around greenwashing, regulatory complexity, and political uncertainty will be critical to sustaining growth and maximizing impact.

Explore live carbon prices HERE to make data-driven decisions for your business today.