The glaciation of sustainable bonds: a quarter of issues disappeared

The frost that hit the capital markets in a decidedly turbulent start to the year of 2025 could hardly spare the world of sustainable bonds. In the first quarter, geopolitical and trade challenges, coupled with a number of regulatory uncertainties, contributed to a roughly one-quarter drop in global issuance of green, social and sustainability (GSS) bonds compared to twelve months earlier. The total amount placed on the primary market has thus dropped by $95 billion to $293 billion, according to data analysed in Mainstreet Partners' Gss Bonds Market Trends report, which identifies the US as the epicentre of the haemorrhage.

The issues of duties, which have generally conditioned the choices of investors and major market players in recent months, have in fact been linked in this case to Donald Trump's arrival in the White House, which has decisively moved climate policies to the background. "The backlash is jeopardising the ability of issuers to raise funds through the Gss bond market," notes Mainstreet Partners, explaining that "many of them have suspended current issues or even chosen to exit the market altogether." The numbers for the US are, moreover, merciless: at the end of March, only one transaction had been recorded - that of Oglethorpe Power for a mere $350 million, to which Fedex would also be added, but in euros - for an overall quarterly balance sheet that moves the hands back to 2017, a 'prehistoric' era for the sustainable bond market.

In the rest of the world, however, although in a complex context, the axe did not fall with the same violence. According to Mainstreet Partners' surveys, Europe once again confirmed itself as the most active area for Gss, despite the fact that the volume of quarterly issues fell to USD 109 billion from USD 150 billion a year earlier. Asia also continued its expanding march, with the first Green Bond from China in yuan for the equivalent of USD 800m to finance climate change mitigation and biodiversity conservation projects. In the Middle East, the Gss Bond market also saw a significant surge in issuance, particularly in the United Arab Emirates and Saudi Arabia, with total active volumes exceeding USD 45 billion.

Taking a closer look at the individual labels of the Gss market shows how green bonds continue to lead in terms of issuance, with around 98 billion issued in the first quarter of 2025. However, their share of the total volume of sustainable bonds has shrunk to 45 per cent from 57 per cent in 2024 and 52 per cent of the annual average since 2020. MainStreet's report also shows that more than 90% of green bonds are aligned with the EU's Paris-Aligned Benchmark regarding the use of proceeds, but only 20% meet the stringent transparency requirements of the GreenFin label, which has a more stringent verification approach and is used on a large scale in France.

"This gap represents a real challenge for strategies classified as Sfdr Article 9, which are increasingly being called upon to go beyond labels and seek real environmental impact," warns Pietro Sette, research director at MainStreet Partners. Moreover, the first quarter of 2025 saw the successful launch of the EU's Green Bond Standard in this respect: A2A was the first ever to issue a 500 million euro green bond fully aligned with the EU taxonomy, and its example was then followed by three other continental issuers, all of which were able to achieve the standard. "Despite a complex macroeconomic and regulatory environment," acknowledges Sette, "green bonds remain the benchmark of sustainable finance and the most credible route for investors seeking transparency, environmental impact and regulatory alignment.