Despite it all: what explains the resilience of green bonds?
The green bond market has been surprisingly resilient; the latest figures from the Climate Bonds Initiative show cumulative GSS+ debt has reached a $6tn milestone
In theory, issuers of green, social and sustainable (GSS) debt have reasons to be cautious. A mix of inflationary pressures, regulatory uncertainty and geopolitical tensions run the risk of engulfing the market in gusty headwinds. If theory had its way, the popularity of such instruments would be in decline.
Yet, green bond issuances are defying theoretical expectations. Latest figures from the Climate Bonds Initiative (CBI) show that at the end of Q1 2025, aligned cumulative GSS+ (GSS and sustainability-linked bonds combined) volume stood at $5.9tn.
Since then, the market has reached a milestone of $6tn. A deeper dive into the figures shows which parts of the market are proving to be resilient and why.
Resilience
According to CBI estimates, green bond issuance in Q1 2025 showed signs of ‘sustained momentum’. Over $262bn worth of GSS+ bonds were issued in over 70 currencies across 107 countries. Government-backed issuers are leading the charge ($1.6tn of issuance) followed by financial institutions and corporates.
"The continued growth in GSS+ debt volumes, marked by Climate Bonds recording over USD5.9 trillion cumulative aligned to Climate Bonds definitions at the end of Q1 2025, demonstrates that global capital markets are increasingly recognising their role in financing the transition to a sustainable, resilient, and inclusive global economy and are willing to deploy capital”, says Clodagh Muldoon, CBI’s head of research.
A similar report of GSS market resilience comes from Mainstreet Partners, an investment advisory firm. Their numbers suggest that GSS bond issuance did fall by 13% in the first half of the year, on a year-on-year basis. However, Q2 numbers compare evenly to their 2024 counterparts.
“Despite a tougher macroeconomic backdrop, green bonds have remained a resilient and credible instrument for sustainable finance, especially among seasoned issuers who are increasingly using GSS bonds to finance activities that meet rigorous criteria”, commented Pietro Sette, research director at Mainstreet Partners.
Issuers
Amongst the issuers staying the course, are UK-based financial institutions. Mainstreet Partners estimates that so far this year, 64% of the UK’s $14bn green bond issuance volume was attributable to its financial institutions. Last year, that number was at 50%.
This is true for the market beyond the UK too. CBI’s list of top non-sovereign green bond issuers is topped by the European Investment Bank, followed by the Agricultural Bank of China.
For European issuers, regulatory tailwinds have helped. Most notably, the European taxonomy has had a role to play. Mainstreet Partners’ analysis of over 1,100 companies in 2024 shows a rise in average taxonomy alignment and eligibility.
This in turn shapes the content and direction of the sorts of expenditure GSS bonds tend to finance. Capital expenditure, for instance.
“Our latest data shows that GSS Bonds continue to channel capital toward more Taxonomy-aligned economic activities. However, persistent gaps in transparency and alignment remain. As investor expectations evolve, closing these gaps will be essential to strengthen regulatory adherence and safeguard long-term market integrity”, says Sette.
The sources of resilience also reflects in the currency base of GSS+ volume. In Q1 2025, according to CBI data, the euro accounted for a greater share of GSS+ deals (39%) than the greenback (30%). The third most common currency
Market pressure
It is notable, for more reasons than one, that the market is proving to be resilient in the US. CBI’s figures suggest that the US is the world’s largest source of GSS+ debt. $827bn of GSS+ volume in Q1 2025 came from American issuers.
Sean Kidney, CEO and co-founder of CBI says this is indicative of the power of green bond markets.
"The only reason the US government rolled back the tariffs earlier this year was because bond markets went in the wrong direction. That’s the kind of influence we’re now seeing in the green bond space”, Kidney says.
The bond market’s pressure then, has a lot to do with its enduring resilience. Pressure that is sourced from issuers and investors behind the $6tn cumulative GSS+ volume.
This, Kidney reckons, bodes well for the green bond market. His message to the market is one worth noting: “The bond market intimidates, so let’s make it work for the planet".
