Moody’s Forecasts Global Sustainable Bond Issuance to Reach $1 Trillion in 2025 Amid Growing Challenges
According to Moody’s, global sustainable bond issuance is set to reach $1 trillion in 2025, maintaining the momentum established in 2024. This growth is primarily driven by the urgent need for financing climate mitigation and adaptation, as well as increasing interest in nature-based solutions. However, the market is expected to face significant challenges, including rising scrutiny over greenwashing, evolving regulations, and shifting investor priorities.
While climate mitigation remains a dominant focus, adaptation financing is gaining traction as the world increasingly deals with the severe impacts of climate change. Nature-based investments are also becoming more prominent in the sustainable finance space. However, social bonds are expected to remain constrained due to the lack of large-scale projects, and transition-labeled bonds and sustainability-linked bonds (SLBs) will continue to occupy niche markets, adjusting to changing investor sentiment.
Despite this projected growth, several factors may complicate the market’s expansion. Moody’s highlights that supply chain disruptions, climate volatility, and policy shifts will pose risks for businesses and governments. Furthermore, the gap between ambitious decarbonization goals and their real-world implementation is widening, creating added pressure on the ESG landscape.
One of the most pressing concerns is the increasing scrutiny surrounding greenwashing. Investors are demanding more transparency and accountability, which could lead to stricter verification requirements. As the gap between climate pledges and worsening environmental events becomes more apparent, the pressure on issuers to meet decarbonization targets will grow stronger.
Additionally, political opposition in certain countries may hinder the growth of ESG markets, while evolving regulations could slow down the market’s development. While these challenges persist, Moody’s emphasizes that sustainable finance remains a critical tool in the global fight against climate change, though it must navigate an increasingly complex and evolving landscape.
As 2025 approaches, the future of sustainable bonds will likely be shaped by a blend of market demand, regulatory scrutiny, and political dynamics, all underpinned by the urgent need for climate action.
