ESG bond issuance surpasses $800bn as momentum builds for sustainable debt

• Global sustainable bond issuance exceeded $800bn in the first nine months of 2024, as governments, financials and corporates looked to finance a growing number of green projects.
• Green bonds continue to be the most popular format, with over 1600 issuances raising over $475bn this year to date. Europe is the leading region for issuance value, led by Germany and France.
• Government issuance dominated activity across green, social and sustainability use-of-proceeds bonds, as sovereign borrowing aims to address urgent environmental and social challenges.

More than three thousand sustainable bonds were issued globally in the year-to-date*, raising over $800bn as upward momentum in the sustainable debt market continues, according to analysis by global law firm Linklaters**. Both the value and volume of sustainable bond issuances have surpassed the first three quarters of 2023, by 2% and 6% respectively.

Since inception, sustainable bond issuance globally has surpassed the $5tn mark, reflecting an increasingly global commitment to sustainable investment and carbon neutrality goals.

Ben Dulieu, Capital Markets Partner, London, commented:

“Sustainable bond issuance is being driven by investor and issuer appetite to finance ESG projects and the energy transition. After a record start to the year, with many front-loading their issuance, we are now seeing volumes tailing off generally. Despite this potential lull in Q4, the long-term outlook remains strong, and we expect momentum to continue to grow as we head into 2025 as sustainability becomes more deeply integrated into capital raising strategies and investment portfolios.”

Germany and France are leaders for green capital

Green bonds continue to be the most popular format, accounting for over half of the total ESG bond issuance this year, with value and volume surpassing last year's levels, by 4% and 11%, respectively, and demonstrating continuing recovery from the slower market experiences in 2022.

Europe led in regional issuance value, with Germany emerging as the top European issuer by value in the first nine months of 2024 at $63bn, driven by both corporate and sovereign issuance, followed by France at $41bn.

Véronique Delaittre, Capital Markets Partner, Paris, commented:

“France has emerged as a leading country for green bond issuance, reflecting its strong commitment to sustainable finance. With the EU Green Bond Regulation set to apply from 21 December, issuers will have a regulatory framework supporting transparency and credibility. Whilst we anticipate uptake of the official label to be gradual, its very presence in the market as the ‘gold standard’ is expected to enhance standards in the wider green bond market and encourage investor confidence in the integrity and robustness of this product. As a result, although the European Green Bond Standard is likely to be challenging for many issuers, we anticipate a continued increase in green bond issuances, both in France and across Europe.”

Dr. Alexander Schlee, Capital Markets Partner, Frankfurt, said:

“The German market has shown robust green bond issuance, a reflection of the fact that green federal securities are a key part of Germany’s sustainability strategy to strengthen its green financial markets. The German market also benefits from a network of banks and financial advisors specialising in green finance and is underpinned by the commitment of both the government and large German corporations to sustainability goals. As transition finance becomes increasingly important, we expect it to further drive market activity and continue making Germany an attractive region for both issuers and investors.”

Linklaters is at the forefront of the green bond market across Europe, including in major economies such as Germany and France. Standout deals include advising iliad on its inaugural €500m green bond issue and Vonovia on the issuance of €2.5bn social and green bonds.

Sovereign issuance drives the market

Sovereign issuance continued to dominate activity across green, sustainability and social bonds.Government issuance comprised almost 45% of green bond value in 2024, at $210bn, with a year-on-year value increase of nearly 20%.

Governments remain the largest issuers of sustainability bonds, accounting for almost 80% of value and two-thirds of volume in 2024. The UK emerged as the largest single issuer, with almost $8bn raised so far this year, closely followed by France. Overall, sustainability bond issuance is on track to surpass last year's levels, with the total year-to-date value nearly hitting last year's full levels of over 930 bonds raising almost $190bn.

Governments also continued to be the largest issuers of social bonds although, in the first nine months of 2024, social bond issuance remained on par with 2023 levels in both volume and value terms, with over $115bn raised. Sustainability-linked bonds (SLB) also bucked the upward trend, with issuance continuing to decline. Europe led in terms of regional SLB issuance, driven by activity in Italy, while corporates accounted for over 90% of the $29bn raised in 2024, with significant contributions from the utilities sector.

Amelia Rice, Capital Markets Managing Associate, London, commented:

“Sovereign issuance continued to dominate as governments look to address urgent environmental and social challenges, a reflection of the world around us as the climate crisis worsens and the need for the energy transition intensifies. The sustainable bond market is evolving and we can expect to see more novel structures gaining traction, such as outcome bonds and sustainability-linked loan financing bonds. These innovative financial instruments are an effective way to drive investment toward complex environmental and social challenges, allowing for a more targeted and effective use of capital.”

Linklaters’ green, social and sustainability bond practice and experience spans its European, North American, and Asian offices and draws on the support of the firm’s market-leading corporate, environment and climate change, energy, and financial regulation practices.

The firm advises on many high-profile issuances, with recent activity including: advising the World Bank on first-of-its-kind carbon removal bond to fund Amazon reforestation and its innovative plastic waste reduction-linked bonds, advising on the Hong Kong SAR Government’s first multi-currency digital green bond offering, advising BofA, Itau BBA, J.P. Morgan, Santander, and Scotia on ENAP’s US$600m Bond Issuance, advising Solvay on its inaugural €1.5bn dual tranche bond issuance and advising Solas Capital AG on structuring a number of green investments in Europe.