Global issuance of sustainable bonds fell sharply in the first half of 2025, reflecting a cooling market amid economic uncertainty and shifting investor sentiment. According to data from the World Bank and Environmental Finance, total issuance of green, social, sustainability, sustainability-linked, and transition bonds, collectively known as sustainable bonds, reached US$480 billion, marking an 18.6% decline compared with the same period last year.

In the second quarter alone, issuance dropped 19.9% year-on-year to US$215 billion. Each bond category recorded declines: Green bonds fell 14.6%, social bonds slumped 27%, sustainability bonds slid 32.8%, sustainability-linked bonds dipped 0.2%, and transition bonds saw the steepest fall at 78.8%. Despite the overall slowdown, green bonds maintained market dominance, capturing 68.3% of total issuance in Q2 2025.

Public sector players remained active, contributing 36% of the quarter’s issuances, or US$79 billion. Sovereign entities accounted for a significant portion, raising US$41.2 billion. Notably, two Asian nations entered the sovereign sustainable bond market for the first time. China issued a 6 billion yuan (US$824 million) green bond in April, while Pakistan launched a 32 billion rupee (US$113 million) green sukuk in May, signaling a growing interest in sustainable finance across emerging markets.

A separate Moody’s report highlighted that the decline in sustainable bond issuance was global, but the Asia-Pacific and European regions contracted at a slower pace than other regions. This allowed their share of global issuance to increase in Q2 2025, offering some resilience in an otherwise subdued market. The quarter also saw a modest uptick in non-financial corporate issuances, suggesting that private sector participation may stabilize in the coming months.

Looking ahead, the market outlook remains cautious. Moody’s has revised its 2025 global sustainable bond issuance forecast downward to US$900 billion, compared to the US$1 trillion projection earlier this year. Analysts attribute the muted performance to macroeconomic headwinds, tighter financial conditions, and policy uncertainty, all of which have dampened investor appetite for sustainable debt instruments.

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While the first half of 2025 has highlighted the challenges facing the sustainable finance market, experts note that growing interest from emerging economies and the dominance of green bonds could support a gradual recovery once economic conditions stabilize.

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Source: The Asset