Green Bond: forecasts and trends for 2025

Disclaimer: this is an automated translation from Italian. Go to the original article.

Green Bonds are bond instruments issued to finance projects with positive environmental impacts, such as renewable energy, energy efficiency, and sustainable mobility. The market has experienced steady growth in recent years, solidifying its role in sustainable finance. In 2024, global Green Bond issuances reached approximately 370 billion dollars, surpassing the 360 billion of 2022, but remaining below the peak of 460 billion in 2021. This consolidation has been accompanied by increasing participation from non-financial issuers and supranational institutions, confirming widespread and diversified interest in these financial instruments.

A study by Crédit Mutuel Asset Management highlighted that in 2024, investments were focused on renewable energies, electric transmission infrastructure, and sustainable mobility, key sectors to accelerate the ecological transition. However, in the second half of 2024, green investment-grade bonds in Europe underperformed expectations due to exclusions from PAB (Paris-aligned Benchmarks) criteria. ESMA intervened to clarify that such exclusions do not apply to bonds compliant with the European standard (EUGBS), emphasizing the need for greater transparency in the allocation of proceeds to strengthen investors' confidence.

Climate finance is crucial for the transition to a low-emission economy. Green Bonds cover about 44% of global financing for the energy transition, a percentage that rises to 52% when all certified securities are included. The rest comes from traditional bond debt (22%), bank loans (16%), and private equity (10%). The adoption of instruments like Transition Bonds and Sustainability-Linked Bonds (SLBs) could expand the market, but it remains essential to ensure transparency and robustness in fund allocation criteria.

Sustainability-linked bonds are strengthening the role of debt markets in financing companies committed to ESG sustainability. In Europe, Green Bonds have received significant attention, while in the USA, their spread has been limited by political dynamics. Despite geographical diversification and the emergence of new instruments like SLLBs (Sustainability Linked Loan Bonds), it is expected that these developments will not be enough to generate significant growth in the sustainable debt market by 2025.

The forecasts for 2025 indicate a modest growth in the Green Bond market, estimated around 10%, with a total volume expected to reach 900 billion dollars, including both corporate and sovereign bonds. This slowdown compared to previous years suggests the need for innovative strategies to maintain investor interest and further promote sustainable finance. Although 2024 was a positive year for Green Bonds, the prospects for 2025 indicate more contained growth. To prevent market stagnation, it will be essential to incentivize the adoption of these instruments globally, promoting favorable policies and increasing awareness of the positive impacts of sustainable investments.

This article was created within the scope of the "Biodiversity services EU expansion" project (CUP: E43D22000480009) under the call by Regione Lombardia "PR FESR 2021-2027 – LINEA INTERNAZIONALIZZAZIONE 21-27", aimed at supporting the internationalization of Italian companies. 3Bee is the naturetech company that develops innovative technologies for monitoring, protecting, and regenerating biodiversity, supporting companies in defining personalized climate strategies based on the analysis of their impacts and dependencies on nature. With a consolidated portfolio in Italy, Germany, and France and significant partnerships, 3Bee continues its expansion in international markets to create a concrete impact through technology.