What next for green bonds after a year of resilience?

The green, social and sustainability bond (GSS) market experienced a range of notable moments in 2025. Some more positive than others but all offering lessons and opportunities for the asset class in 2026.  Many of these themes are likely to continue throughout this year, so looking back at what has happened could be a crucial step for successful investing.

The market weathered anti-ESG narratives from the US and climate and regulatory-related headwinds from Europe but also celebrated milestones such as the EU Green Bond standard and a stable, and virtually non-existent, greenium level. Perhaps the most notable of these, however, was the trend towards a maturing market where issuance levels are settling into a more predictable range. This demonstrates how this universe has progressed from a niche to an established offering.

Indeed, GSS issuance in 2025 amounted to $726bn, close to 2024 record year and bringing another 83 inaugural issuers to the market¹. This trend mostly reflects that the early years’ euphoria has passed and the GSS market is entering a new phase. As has been seen in previous years, green bonds were the instrument of choice with the market still the largest driver of GSS growth and the main source of new issuers (close to four new issuers out of five in the market came with a Green label). 

Green, Social, and Sustainability Bond Issuance (USD Bn)

Beyond green bonds, sustainability bonds showed robust growth in 2025 at $203bn, above 2024 record as USD issuances continued to drive this segment with close to 50% of issuances². We believe that this makes this label a great combination with green bonds to help boost diversification.

It hasn’t been a success story across the board: the social bond market had its lowest volume of issuance in five years, struggling to find both a wider issuer and investor base. Likewise, the anti-ESG headlines coming out of the US saw US issuers vanish. Their issuances declined by close to 40% in 2025 compared to 2024, accounting for c. 2.5% of total GSS issuances³. Of course, they have never been a great contributor historically, but they were once expected to become one. Thus, it is still a missed opportunity for the GSS market and a thorn for those investors who have conventional global benchmarks.

Alongside this, non-European issuances have struggled to pick up. While APAC has been a historical source of growth over the past three years, their share of green issuances declined slightly to 11% in 2025 from 13% in 2024⁴.  Nevertheless, looking at emerging markets (EM) as a whole, the picture may be a bit brighter for green bonds, with an EM contribution up 3% from its 2024 level⁵.

Enhancing diversification within the asset class

The GSS market continues to develop and adjust to the changing environment. Sustainability bonds are issued in USD creating more currency diversification away from EUR, while credit issuers took an even larger share of green bond issuances in 2025, up from 51% to 55% of total issuances⁶. This comes at a time when sovereign issuance had declined from previous years and, we think, demonstrates how historical issuers tend to come back to the market and build a curve. 

How the market has raised the bar

We also saw standards take a leap forward, with 2025 the debut year for the EU Green Bond standard. This should bring even more transparency to investors and contribute to further strengthening of the credibility of green bonds. Accounting for 5% of total green bond issuance⁷last year across corporates and a Danish sovereign bond, this early adoption, we believe, reflects that the appetite for transparency and stringency remains strong.

Last but not least, greenium, once a source of discomfort, is no longer a source of worry, hovering around 0 basis points for more than a year now. The absence of greenium might be good news for investors, yet some issuers could wonder if this is worth the effort. Even so, it could be argued that this may rid the market of opportunistic issuers. For those issuers committed to this asset class, a BIS study⁸ demonstrated green bond issuers decarbonised faster than non-green bond issuers, and a similar LSE study⁹ confirmed this conclusion; a strong argument to encourage investors to direct more capital to green bonds, as the gap to finance the Net Zero transition remains massive.

Will 2026 give investors a sense of déjà vu?

As the market enters a more mature stage, 2026 could look a lot like 2025 with issuances expected to be relatively flat. The era of record-breaking issuances is likely behind us, and one should get used to the figures we saw in 2025 as GSS enters a more mature stage. Now, at approximately the same size as the euro credit market, investors should expect issuance to stabilise and be more influenced by technicals and investment schemes. We would, nevertheless, expect green bonds to remain the main driver of growth, still dominated by European issuers and more broadly by Euro-denominated issuances.

Compared to 2025, the share of green bonds maturing will be up by c.a. 30% in 2026 to reach c. $170bn¹⁰. These redemptions will come mostly from banks and quasi-sovereign issuances and should support the market looking ahead. However, there is no guarantee that all of these will be refinanced via green bonds.

Indeed, 2026 could see a refocusing of the green bond market towards historical, more naturally aligned issuers with a larger share of readily accessible eligible assets, reflecting where investments are truly happening and refinancing needs. 

Beyond green bonds, sustainability bonds should continue to grow and benefit from a preference from non-European issuers, especially in the APAC region where socioeconomic development priorities and taxonomies could provide an additional boost. The social bond market is expected to remain concentrated towards the same sectors and issuers, with issuances probably muted again.

We expect to see significant investments continuing in renewable energy, grids and green buildings. While themes like climate adaptation and water (blue bonds) present nascent trends that should garner more interest, allocation will likely be slow to grow in the short-term, partly due to structural factors.   

What does this mean for GSS strategies?

Even in a maturing market, there are options to unlock potential opportunities, and we are already seeing compelling ways for investors to combine a core bond allocation with transparency and impact measurability at no additional cost. This will remain a key argument to support demand for the asset class. Yet it will be important to watch how the increased redemption profile influences, and potentially reshapes, the green bond market in terms of geography, sectors and issuers in the year to come. As it stands, we believe that with the maturity, size and composition of the market, it is already possible to build multiple different GSS strategies, including one with limited tracking error against a global aggregate benchmark.

With the anticipated deceleration in new issuers and expectations of a refocusing towards more naturally aligned issuers, strategies that can break from the mould and adeptly seize on new opportunities, diversification and value across the GSS market, sectors, and geographies are well placed to navigate the market. With this in mind, we think that flexibility and agility will be key to making the most that this market offers.

Our expertise in managing green bonds for over that past ten years means that we are in a strong position to anticipate these trends and build specific strategies that take into account the specificities of the market, which are now rather stable. Being nimble and creating solutions that incorporate the strengths of the GSS market with the diversification and stability that a mature market offers will be key for investors and net zero investment solutions in 2026.