Alan Meng
Lee Clements
Green bonds show resilience with Europe and Americas down offset by APAC surge
Green fixed income markets entered 2025 under a cloud of uncertainty, with headwinds from macroeconomics, political polarisation and geopolitical tensions[Note1]. But three quarters into the year, as the dust begins to settle, green bonds have continued to demonstrate resilience.
By the end of Q3, 2025 green bond issuance reached US$467 billion[Note2] – up 1% from the same period last year and keeping 2024’s full year record of US$572 billion within reach. This has been helped by a healthy overall market for debt issuance, with the share of green bonds relative to total global debt issuances dipping only slightly from 4.5% to 4.3%.[Note3]
As issuance momentum continued, the total outstanding for green bonds exceeded US$3 trillion at the end of Q3 2025 for the first time.[Note4] This means the global green bond outstanding universe has expanded at around 30% compound annual growth rate (CAGR) over the past 5 years – underscoring the accelerating demand for climate finance to support mitigation and resilience, as highlighted in the recent LSEG Investing in the Green Economy 2025 report.
Figure 1 Green bond issuances show resilience amid volatility
A slump in US corporates and soft issuance in Europe offset by strength in Asia
Europe remained the dominant source of global green bond issuance in 2025 with US$256 billion issued (or 55% of the total volumes), even if year-to-date (YTD) issuance is down 5% year-on-year. In the Americas issuance dropped even more sharply - down 13% from the same period last year. In the U.S., corporate green bond issuance plunged by nearly 60%, but the municipal segment showed notable resilience, rising 30% and keeping overall U.S. issuance roughly on par with the levels reached during the same period last year. The slowdown across these regions was offset by resurgent issuance in the Asia-Pacific, led by China, where onshore green bond issuance doubled year-on-year.
Green bond markets continue to innovate and diversify
Corporate issuers – both listed and privately held – continue to lead the green bond market. They accounted for about two thirds of 2025 issuance, with Financials, Utilities and Industrials in the lead. Sovereigns, too, relied on green bonds to mobilise resources in innovative ways. In April, China issued its first-ever sovereign green bond on the London Stock Exchange’s Sustainable Bond Market (SBM).[note5] Denmark also launched the first sovereign bond under the new European Green Bond (EuGB) Standard,[note6] structured as a ‘green twin bond’. This concept was pioneered by the German government, and allows investors to observe price difference between green and conventional bonds..[note7].
Use-of-proceeds data also shows that green debt markets continue to diversify. While mitigation themes such as renewable energy, energy efficiency and low-carbon transport still dominate, over a quarter of the eligible use-of-proceeds categories in the overall green bond market relate in some form to adaptation and resilience investments..[note8] In the UK, for example, around 12% of its green gilt proceeds support flood and coastal-erosion management.[note9]
Sustainable bond funds continue to show steady inflows with green bond performance aligning closely with conventional bonds
The performance of green bonds – as measured by FTSE World Broad Investment-Grade Green Impact Bond Index (Green WBIG) – continues to closely track its benchmark, the FTSE World Broad Investment-Grade Bond Index (WBIG); despite slight underperformance year to date (see Figure 2). Note that relative performance of green bond portfolios is generally sensitive to rate increases, due to their positive active duration profiles underpinned by a higher concentration of long-duration government green bonds.
Figure 2 Green bonds performance since 2018 (29 Dec 2017=100)
Sustainable bond fund flows have also continued to show resilience. According to LSEG Lipper data, 46 of the past 60 months have recorded net inflows – a strong signal of sustained demand, broadly mirroring the recovery of the wider fixed-income market following the 2022 sell-off. In March and April 2025, the segment saw brief outflows amid heightened volatility. However, sentiment quickly recovered, with May posting the second-highest monthly inflows of the past five years. Overall, since October 2020, sustainable bond funds have attracted cumulative net inflows of US$54 billion, underscoring enduring investor confidence in green and sustainable fixed-income strategies.
Figure 3 Sustainable bond fund saw US$54 billion net inflows over 60 months
As 2025 draws to a close, the green-bond market continues to demonstrate remarkable resilience - despite prevailing uncertainties and slowing growth in some regions. While short-term issuance and performance may remain influenced by macroeconomic conditions, the underlying fundamentals - rising financing needs for climate-mitigation and adaptation infrastructure[note10], strong investor appetite, and stabilising performance in line with the broader fixed-income market - suggest that green bonds will remain a cornerstone of sustainable finance portfolios.
footnotes
[1] FTSE Russell, LSEG, Sustainable Investment Insights Report 2024 Q4 | Back to Note 1
[2] Note the issuance figures are sourced from LSEG fixed income databases, which cover different asset classes, including corporate and government bonds, securitisations and US municipal bonds. Specifically, the annual issuance data is derived from Deal Intelligence and US Municipal Bond databases, and outstanding volumes are based on GovCorp database. | Back to Note 2
[3] Green bond ratio represents the principal amount of green bonds as a share of the overall newly issued bonds in each year, and it does not include US Muni bonds and securitisations. | Back to Note 3
[4] Cumulative green bond issuance reached approximately US$ 3.5 trillion as of Q3 2025, covering labelled green bonds, green securitisations, and green US municipal bonds, etc. Figures may differ across other market sources due to variations in data coverage, classification and eligibility criteria. | Back to Note 4
[5] LSEG, Ministry of Finance of the People’s Republic of China launches inaugural Sovereign Green Bonds Issuance | Back to Note 5
[6] Danmarks Nationalbank, The Government has issued a 10-year green bond under the EuGB framework | Back to Note 6
[7] Finance Agency, the Federal Republic of Germany, Twin Bond Concept - Deutsche Finanzagentur | Back to Note 7
[8]LSEG, Green Economy Report - Investing in the green economy 2025 | Back to Note 8
[9] United Kingdom Debt Management Office, UK Green Financing Allocation Report - October 2024 | Back to Note 9
[10] According to Climate Bonds Initiative, a total of US$17.8 trillion sustainable bonds is to be issued globally by 2035. The $4.4trn Climate Investment Opportunity. | Back to Note 10
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