The cumulative issuance of Green, Social, and Sustainability (GSS) bonds has now topped $5 trillion, according to the latest GSS Bonds Market Trends Report from ESG data provider MainStreet Partners.
This surge in GSS bonds underscores the robust demand for sustainable finance, with green bonds accounting for $356 billion in issuance in the first half of 2024 alone, making it the most active period for green bonds since the market began. Year to date, green bonds represent 57% of total GSS issuance.
Europe remains the leader, contributing $291 billion in green bond issuance—a 13% increase from the previous year—demonstrating the continent’s continued commitment to sustainable finance.
However, regulatory changes are set to impact funds focused on GSS Bonds. The European Securities and Markets Authority has introduced new guidelines requiring sustainability-focused funds to align with either the Paris-Aligned or Climate Transition Benchmarks. According to the researchers, this shift may lead fund managers to reconsider their portfolio strategies or even rename funds to meet compliance standards.
Green bonds market hits $2 trillion milestone
As many as 122 GSS Bond funds now face the challenge of aligning with the new benchmarks or adapting their names. Although many of these funds are aligned with broader sustainability objectives, they may need further adjustments to comply fully with the benchmarks’ stringent requirements.
The report also pointed to advancements in Sustainability-Linked Bonds (SLBs). Issuers focusing on greenhouse gas reductions now cover 70% of their emissions with Sustainability Performance Targets, up from 58% in 2023.
In the utilities sector, green bonds play a vital role in financing the energy transition, with utilities holding the highest green debt Ratio—39% of their debt issued as green bonds. Additionally, the report emphasised the importance of tracking carbon footprints, with green bonds providing asset managers a direct path toward achieving net-zero targets.
aime Diaz-Rio Varez, research associate at MainStreet Partners, said: “Our data highlights the organic and robust growth of the GSS Bond market. Record-breaking issuance this year underlines the critical role that GSS Bonds play in financing the transition to a greener, more sustainable economy. For this growth to keep its momentum, it is vital that regulators continue in their mission to create a transparent environment for investors, but also, it is equally as important to create a supportive environment for transitioning issuers.”
