Investors Turn to ESG Bonds as Trump Steps Back from Green

US government agencies like Ginnie Mae are contributing to this tremendous growth in the social bond market.
However, concerns remain with respect to the Trump administration's budget cuts to such agencies.
The social bond market is witnessing an unprecedented surge despite environmental, social, and governance (ESG) investments facing pushback from US President Donald Trump.
A large number of investors are flocking to buy bonds issued by US government agencies amid the Trump administration's promotion of fossil fuels and retreat from green commitments.
Social bonds, a segment of sustainable finance, are used to finance projects in the health, housing, and education sectors. Issuance last year increased by 130% to US$657 billion, and this trend has continued into the first quarter of this year, notes Bloomberg. This makes the social bonds market nearly as large as the green bond market.
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Ulf Erlandsson, chief executive officer of Anthropocene Fixed Income Institute, said: "The flow of social bond deals may continue even if there is a backtrack on some climate commitments. Still, given the notes are based more on social constructs than science, there are risks the debt is even more politically sensitive in the US."
One of the major factors behind this enormous growth was Ginnie Mae, a US government agency, expanding its debt programme to back low-income housing and veterans. In 2023, it also retroactively categorised some existing bonds as social bonds, increasing total issuance.
Fannie Mae and Freddie Mac, both government agencies, have also contributed to this surge. US housing agencies accounted for the majority of the US$149 billion in new social bond deals in the first quarter of 2025, with Ginnie Mae responsible for almost two-thirds of that amount.
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In addition to US institutions, other global entities are also issuing social bonds. For example, France’s social debt fund, International Finance Corp., and Korea Housing Finance Corp. have issued them in 2025.
Meanwhile, top organisations like JPMorgan Chase and BNP Paribas are underwriting these deals, underlining an increasing demand for these assets.
However, there are major concerns among investors, particularly as Ginnie Mae and other agencies are likely to face budget cuts under the Trump administration, which might deal a heavy blow to the mortgage bond market. Reportedly, a quarter of Ginnie Mae’s workforce has either resigned or been dismissed.
Amid these developments, investors are still hopeful that the social bond market will bounce back strongly. Recently, Standard Chartered launched a US$1 billion social bond to support small businesses owned by women in Asia, Africa, and the Middle East after the ICE Social Bond Index outperformed this year with a 3.4% gain. Citigroup, in a statement, said that social funding in Asia is projected to increase by more than 10% in 2025.
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According to United Nations estimates, there is a US$4 trillion annual funding gap for global sustainable development in education, healthcare, and social protection. However, most social bond issuance is concentrated in developed nations and the Asia-Pacific region, which includes many emerging markets, accounting for only US$7.6 billion in sales this year.
Jeffrey Lee, senior vice-president at Moody’s Ratings, added: "Still, more social investments may flow to developing countries as large asset managers expand by acquiring stakes or buying impact-investing funds. That might not change the numbers in terms of the issued amount dollar sizes, but the number of transactions might get more and more popular in frontier and emerging markets."
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Source: Bloomberg