Global issuance of labelled sustainable bonds – including green, social, sustainability, sustainability-linked, and transition bonds – is anticipated to again reach around $1 trillion in 2025, according to a new forecast released by Moody’s Ratings, as headwinds including political changes from the new U.S. administration are expected to be offset by a continued focus on sustainable development across many regions, including increased clean energy investments, and growth in climate adaptation and nature-related projects.

If the forecast is achieved, it would mark the fifth consecutive year of sustainable bond issuance at around the $1 trillion level. While 2024 issuance remained flat year-over-year at $1 trillion, however, sustainable bond volumes underperformed strong growth in the overall bond market in the year, with share of global issuance declining to 11% from 15% in the prior year.

By bond type, green bonds are anticipated to continue to dominate, with Moody’s forecasting record issuance in 2025 of $620 billion, up slightly over 2024. Green bond issuance is expected to be driven by climate mitigation initiatives, with policy support, private sector pledges and cost declines in clean energy supporting climate investment through the year. Moody’s noted that even as the new U.S. administration “may have a dampening effect on global climate action,” clean energy investments will continue in other countries to support decarbonization and energy security.

Moreover, Moody’s does not anticipate a significant decline in U.S. sustainable bond volumes in 2025, as reduced federal investment is offset by private sector investment, and certain state and local governments. Notably, North America has declined significantly in its representation in the global sustainable bond market, with volumes of $124 billion in 2024 already having declined nearly 30% from 2021.

Among the key themes driving green investments highlighted in the report, Moody’s noted greater demand for financing of energy- and water-efficient data centers, and related investments in nuclear energy projects to help meet increased low carbon energy demand from data centers, as well as investments in emerging green technologies to provide low carbon solutions for hard-to-abate industrial sectors.

Moody’s also forecast a continued diversification in green bond issuance towards financing adaptation and resilience projects “as the economic, financial and human costs of extreme weather rise and Paris Agreement1 targets look increasingly out of reach,” and towards nature-related projects driven by “growing focus on conservation of ecosystems and biodiversity to arrest the pace of global warming and limit its impact.” Notably, labelled bond financed adaptation and nature-related projects have been gradually rising over the past few years, reaching around 23% of green and sustainability bond proceeds in 2024, according to Moody’s.

Moody’s also forecast that social bond issuance will decline by 9% in 2025 to $150 billion with a lack of benchmark-sized projects, and that sustainability bonds, combining green and social projects, will remain stable at $175 billion. Transition bonds, which emerged in 2024 with the government of Japan’s $11 billion inaugural issuance, are anticipated to remain flat at $20 billion, and dominated by Japan, but with potential for growth driven by diversification to other issuers. Sustainability-linked bond issuance is anticipated to grow by 14% to $35 billion,  but to remain well below 2021-2023 levels, with the market continuing to be pressured by investor scrutiny of the credibility and robustness of the bonds’ linked sustainability targets.

In the report, Moody’s Ratings said:

“We expect global sustainable bond issuance to be around $1 trillion in 2025, steady from 2024. Global focus on sustainable development and investment will support the market. But various deterrents, including heightened scrutiny of greenwashing, evolution in market standards and regulations, and a more complex environment, including political headwinds in some countries, will likely stifle growth.”