The enduring strength of green bonds: an exploration of the factors behind their persistence
The green, social, and sustainable (GSS) debt market has proven its resilience in the face of inflationary pressures, regulatory uncertainty, and geopolitical tensions. By Q1 2025, the cumulative GSS+ issuance reached a milestone of $6 trillion, with $262 billion issued in that quarter alone.
Kidney, a prominent voice in the bond market, urged investors to view the GSS market as an opportunity to finance the transition to a sustainable economy. The market has since grown, reaching a total of $5.9 trillion at the end of Q1 2025.
The resilience of the GSS debt market is attributed to sustained strong investor demand, active issuer engagement, and government-backed issuers leading the way. Government-backed issuers contributed $1.6 trillion in issuance, providing market stability and signaling strong policy support.
Moreover, the growing investor appetite for climate and sustainability-focused projects is evident, despite macroeconomic headwinds. This reflects an increasing prioritization of ESG investments, with 64% of the UK's green bond issuance volume in 2025 so far being attributable to its financial institutions, up from 50% in the previous year.
Regulatory updates, such as amendments to the Green Bond Principles and expanded guidance on eligible projects, are also improving transparency and alignment with green and social objectives. This clarity boosts market confidence and reduces concentration risk, as the issuance is spread across a wide range of sectors and regions.
The euro accounted for a greater share of GSS+ deals in Q1 2025, with a volume of 39%, while the greenback accounted for 30%. Notably, the US is the world's largest source of GSS+ debt, with $827bn of GSS+ volume in Q1 2025 coming from American issuers.
Sean Kidney, CEO and co-founder of the Climate Bonds Initiative (CBI), considers the resilience of the US green bond market as indicative of the power of green bond markets. Kidney also points out that the US government rolled back tariffs earlier this year due to pressure from the bond market, demonstrating the influence of green bond markets.
Pietro Sette, research director at Mainstreet Partners, commented that green bonds have remained a resilient and credible instrument for sustainable finance, especially among seasoned issuers. NZI Spark! Fixed Income is mentioned as a powerful lever in the context of the green bond market, although specific details were not provided.
The continued growth in GSS+ debt volumes demonstrates global capital markets' increasing recognition of their role in financing the transition to a sustainable economy. Mainstreet Partners reported that while GSS bond issuance fell by 13% in the first half of the year compared to the same period in 2024, Q2 numbers were on par with those from 2024. This resilience is a testament to the growing importance of sustainable finance in the global economy.
[1] Mainstreet Partners, 'Green Bond Market Update Q1 2025', [accessed 2025-05-01]. [2] Climate Bonds Initiative, 'CBI Green Bond Market Update Q1 2025', [accessed 2025-05-01]. [3] CBI, 'US Green Bond Market Update Q1 2025', [accessed 2025-05-01]. [4] Green Bond Principles, '2025 Update', [accessed 2025-05-01].
Environmental science students, intrigued by the growth of the green bond market, may consider investing in climate-change focused projects as an innovative approach to finance. The resilience of the green bond market, demonstrated by its continuous issuance despite macroeconomic headwinds, suggests potential financial returns while addressing the critical issue of environmental sustainability.
