Green debt sales reached record levels despite climate impacts

Investors have found refuge in climate-friendly assets this year despite policy and regulatory rollbacks in the US and Europe as artificial intelligence drives demand for energy infrastructure.Global issuance of green bonds and loans has reached a record $947 billion so far this year, according to data compiled by Bloomberg Intelligence. That comes as renewable energy stock markets post their first annual gain since 2020, easily outperforming the S&P 500, while stocks of electric grid technology companies remain in favor.

The flows are notable in a year when US President Donald Trump supported fossil fuels and dismantled clean energy subsidies and legislation. Europe has also rolled back some of its strictest environmental regulations due to concerns about growth and competitiveness.
Still, clearer policy signals and an expected increase in global electricity demand of almost 4%, driven by AI, cooling and electrification needs, are boosting investor optimism.

“Green investments are increasingly seen as core infrastructure and industry plays, and not just as niche ESG transactions,” said Melissa Cheok, associate director for ESG investment research at Sustainable Fitch. “Capital is likely to flow to areas with clear visibility into revenues, policy support and structural demand, such as grid upgrades and renewables associated with electrification.”

Asia-Pacific companies and government-linked issuers raised $261 billion from green debt, up about 20% from a year earlier, with China and India supporting renewable energy rollouts, according to Bloomberg Intelligence. China had issued a record $138 billion in green bonds, led by its largest lenders. It also debuted a sovereign offering in London earlier this year.

The so-called greenium – the lower financing costs for green bonds – is most visible in Asia-Pacific, where some issuers are receiving a discount of more than 14 basis points for using a green label in November, according to BloombergNEF. Green bonds are often used by companies to raise money to switch to renewable energy or low-carbon transport.

BNP Paribas SA and Credit Agricole SA are the top underwriters of green bonds this year, according to data compiled by Bloomberg. The number of green bonds outstanding has grown at a compound annual rate of 30% over the past five years and issuance now accounts for around 4.3% of the global total, LSE Group researchers said last month.The easing of US interest rates and refinancing needs could boost global green bond sales to as much as $1.6 trillion next year, said Crystal Geng, chief environmental, social and governance research officer for Asia at BNP Paribas Asset Management.

Green stocks are market leaders this year. The S&P Dow Jones Indices and WilderShares clean energy indexes are up 45% and 60% respectively, though both remain below their 2021 peaks.

U.S. solar and battery storage stocks including SolarEdge Technologies Inc. were among the top performers, while wind turbine makers in China and Germany led the way. India has become a hotspot for renewable energy IPOs, with 11 listings raising more than $1 billion and another six companies seeking more than $3 billion. Last year, 14 renewable energy companies raised $2.4 billion through initial public offerings.

Not all markets benefit from it. U.S. green debt issuance fell 7% this year to $163 billion, and supranational bond sales fell by a similar amount. Fundraising in Germany remained stable at approximately $79 billion.

While India saw record green lending volume of $7 billion, strong interest from foreign banks has intensified competition, putting 5% to 10% pressure on financing margins on renewable energy and other projects, said Jeanne Soh, head of structured finance for Asia at Sumitomo Mitsui Banking Corp.

Sales of sustainability-linked debt fell about 50% this year to $165 billion, due to concerns about greenwashing, Bloomberg Intelligence data shows. Transition bond issuance has more than halved to $10.9 billion for sectors that are difficult to reduce.

The trends are likely to reverse in the next two years, says Xuan Sheng Ou Yong, client portfolio manager for sustainable investing at Robeco in Singapore. Changes to European fund rules will allow asset managers to define what qualifies as a sustainable investment, opening the door for emissions-saving investments in more polluting sectors, he said.

Overall, global sustainable debt stood at about $1.6 trillion this year, down more than 8% from 2024, Bloomberg Intelligence data shows. In addition, more than $500 billion worth of social bonds were sold in the US linked to the Government National Mortgage Association, better known as Ginnie Mae, which guarantees principal and interest on mortgage-backed securities.