Sustainable bonds have grown rapidly in the past decade. These bonds can play an important role in accelerating the transition to a sustainable economy by encouraging issuers to adopt better practices and expand their investor base. This report explores key issues and trends in sustainable bond markets. It aims to inform policymakers and market participants on the goals of investors when acquiring these instruments, how they may influence the decisions of corporate and official sector issuers, and what can be done to further develop the market.
Sustainable Bonds
Trends and Policy Recommendations
Abstract
Executive summary
Sustainable bonds can be classified into two major categories. “Use-of-proceeds bonds” are bonds whose proceeds should be used to finance eligible environmental, social or sustainable projects. “Sustainability-linked bonds” are bonds for which the issuer’s financing costs or other bond characteristics can vary depending on whether the issuer meets specific sustainability performance targets within a timeline but whose proceeds do not need to be invested in projects with an expected positive environmental or social impact.
In 2024, global issuance of sustainable bonds amounted to USD 522 billion in the corporate sector and USD 473 billion in official sector. At the end of the year, the outstanding amount in the corporate sector totalled USD 2.4 trillion, representing 7% of all outstanding corporate bonds. It stood at USD 2.2 trillion in the official sector, representing 3% of all official sector bonds. Green bonds were the dominant type of sustainable bond issued by both corporations and the official sector with, respectively, USD 382 billion and USD 257 billion. After a record amount of USD 115 billion in 2021, corporate sustainability-linked bond (SLBs) issuance has sharply declined since, while in the official sector the volume of SLBs remained low.
Between 2015 and 2024, Europe dominated sustainable bond issuance, issuing half of all corporate and official sector sustainable bonds. Companies in the People’s Republic of China (hereafter “China”) and the United States follow, while governments and agencies were active issuers in Developed Asia Pacific excl. US and Latin America. Ninety-three per cent of issuances used the standards developed by the International Capital Market Association (ICMA) to label sustainable bonds. Sustainable bonds tend to exhibit lower liquidity compared to their conventional counterparts, both in the official and corporate sectors.
The use of a second party opinion provider increased substantially in the last five years: in 2019 less than half of sustainable bond issuers required a pre‑issuance verification, while in 2024 it was a common practice for 81% and 69% of corporate and official sector issuers, respectively. When analysing the legal documentation of a sample of bonds, three‑fourths of the green, social and sustainability (GSS) bonds mention that the refinancing of existing eligible projects with the proceeds is allowed. Furthermore, no prospectus mentions a contractual penalty if the issuer does not use all proceeds to finance or refinance eligible projects. In the case of SLBs, failure to meet the sustainable performance target(s) usually triggers a coupon step-up, with a 25‑basis point increase applied in about half of the cases.
Despite the rapid growth of the sustainable bond markets, there is no clear evidence that issuers systematically benefit from a so-called “greenium”. Based on an analysis of 1 477 pairs of corporate bonds and 192 official sector bonds issued globally, there is no statistically significant evidence that issuers systematically benefit from a premium for issuing a sustainable bond as opposed to a conventional one, both for the corporate and official sectors.
If the proceeds of all sustainable bond issuances are invested in projects that deliver positive environmental and social benefits for relatively small costs, investors and society at large will benefit. However, the regulatory and institutional frameworks must guarantee that markets work efficiently, and that the interest of investors is protected. The following recommendations are based on the data analysed in this report and are proposed to guide the discussions by policymakers, regulators, central banks and standard-setters on how to develop sustainable bond markets further and make them function more efficiently.
A. Regulatory authorities should encourage the interoperability of sustainable bond standards and taxonomies for sustainable activities, with a focus on international comparability and harmonisation between markets.
B. The disclosure of sustainability-related metrics relevant to holders of sustainable bonds should be reliable, consistent, and comparable.
C. Standard-setters and regulatory authorities may consider the extent to which refinancing concluded projects using the proceeds of green, social and sustainability bonds should be allowed, and if so, what the appropriate disclosure practices should be.
D. Key service providers, such as second party opinion providers, may warrant treatment comparable to that to external auditors and credit rating agencies.
E. Institutions setting stewardship codes may consider adopting guidance on institutional investors acquiring sustainability-linked bonds, including the importance of analysing whether they have ambitious sustainability-related performance targets.
