Sustainable Debt Issuance Slows as Markets Position for 2026 Rebound
Global sustainable debt issuance lost momentum in 2025, falling 12% year on year even as clean energy investment surged — a divergence that is now shaping expectations across debt capital markets for 2026.
Data from the Institute of International Finance (IIF) shows issuance dropped to roughly $1.4 trillion in 2025, marking the slowest pace of growth in five years. Despite the slowdown, the overall sustainable debt universe continued to expand, reaching approximately $7.8 trillion.
Investment demand remains strong
The softer issuance backdrop contrasts with continued momentum in the real economy. Global energy transition investment climbed to a record $2.3 trillion, underscoring that decarbonisation spending remains robust even as financing patterns adjust.
For capital markets participants, the divergence suggests demand for sustainable funding remains structurally intact but more sensitive to policy, pricing and issuer behaviour.
Market expected to regain momentum in 2026
Looking ahead, research from ING indicates global sustainable finance issuance (excluding asset-backed securities) could recover modestly in 2026 to around $1.62 trillion. While still below earlier peak levels, the projected rebound points to a market that is recalibrating rather than retreating.
Analysts emphasise that the key shift lies in changing market composition, with regional dynamics and product preferences increasingly diverging.
Regional trends diverge
Europe, the Middle East and Africa (EMEA) is expected to remain the largest sustainable issuance region in 2026, supported by refinancing needs and continued clean energy deployment. Central and Eastern Europe has shown particularly strong momentum following roughly 40% year-on-year growth in 2025.
By contrast, the US market has softened amid policy uncertainty and reduced fiscal incentives, prompting corporates and financial institutions to pull back from sustainable issuance. ING expects US volumes to remain relatively muted in 2026, although rising electricity demand linked to AI infrastructure and electrification could provide partial support.
Asia-Pacific continues to demonstrate steadier expansion, driven primarily by financial institutions and corporates, with further growth anticipated next year.
Product mix continues to evolve
Green bonds and green loans are expected to remain the primary engines of market growth in 2026, with projected issuance of around $700 billion and $255 billion respectively. These instruments continue to benefit from clearer standards and stronger investor confidence.
Sustainability-linked bonds, however, are likely to remain subdued amid ongoing concerns about KPI credibility and relatively limited financial penalties for missed targets. Transition finance instruments could see moderate expansion, particularly in Asia-Pacific where new national frameworks are emerging.
Corporate issuance shows signs of recovery
Non-financial corporate sustainable issuance declined more than 15% in 2025, but ING expects a partial rebound in 2026, with volumes potentially reaching about $640 billion. Refinancing cycles and rising infrastructure investment needs are expected to be key drivers.
Utilities investment — especially in electricity grids and energy systems — remains a central structural theme, alongside growing power demand from AI data centres and broader electrification trends.
The practical takeaway is that while sustainable debt growth has cooled, refinancing cycles, infrastructure spending and regional demand shifts should continue to support issuance opportunities into 2026.
Structural trajectory remains positive
Despite near-term volatility and policy headwinds in some regions, the broader direction of travel for sustainable finance appears intact. Governments, corporates and financial institutions continue to rely on labelled debt markets to fund decarbonisation and energy transition projects.
For debt capital markets participants, the focus in 2026 is likely to shift from headline growth rates to the evolving regional and product composition of sustainable issuance.
