The green, social and sustainability (GSS) bond market reached its highest level in three years, with total issuance hitting $966bn billion in 2024, an 8% increase on 2023, according to ESG data provider MainStreet Partners.
The market’s growth pushed cumulative GSS issuance beyond the $5.5 trillion mark, solidifying its role in sustainable finance. Green bonds led the market, accounting for 58% of total issuance at $561 billion, marking its second most active year since inception. Social bonds saw the biggest increase, surging to $251 billion from $159 billion in 2023, while sustainability bond issuance fell to $152 billion, down from $203 billion last year. The revival of transition bonds, particularly driven by Japanese issuers, also marked a shift in sustainable debt markets.
Europe continues to dominate the GSS Bond space, according to the research, contributing 60% of total issuance volumes, with 56% of issuances denominated in euros. Asia remains an important player, particularly in the social and sustainability bond segment, amid regulatory advancements in the region.
However, according to the researchers, upcoming regulations by EU agency European Securities and Markets Authority could reshape the market, with the Paris Aligned Benchmark (PAB) and Climate Transition Benchmark (CTB) introducing stricter compliance measures. These approaches focus more on the use of proceeds rather than just the issuer, they added, requiring Article 9 fund managers to reassess their portfolios to maintain compliance. The report cautioned that over 10% of GSS bond volume risks exclusion under PAB regulations, while nearly 20% could be affected by CTB standards.
GSS bond issuance is expected to surpass $1 trillion in 2025, although growth dynamics may shift, according to the researchers. Green bonds will likely maintain their dominance, but the report predicts moderate growth as the market matures.
Green bond issuers prepare for EU’s new standard
Europe will remain the largest regional market, supported by policy initiatives and strong investor demand, but supply growth may stabilise as the market reaches a more mature phase. Meanwhile, 2025 is set to witness the introduction of the EU Green Bond Standard (EU GBS), designed to strengthen investor confidence through enhanced reporting and verification requirements.
Under the EU GBS framework, at least 85% of proceeds must be allocated toward EU Taxonomy-aligned sustainable activities, making it a key development to watch in 2025. While MainStreet Partners does not anticipate widespread adoption this year, it expects the impact on issuance volumes to become clearer over time.
Pietro Sette, research director at MainStreet Partners, stated: “2024 has shown outstanding resilience of the GSS Bond market. The continued leadership of European issuers underlines the importance of a strong regulatory environment for the growth and improvement of the market.
“Despite the positive regulatory trend to date, the look-through approach under the new Paris Aligned Benchmark and Climate Transition Benchmark guidelines pose more than a question mark for fund managers who previously had an “issuer-focused” approach. The next few weeks will prompt some rethinking for investors and will further spur more engagement with issuers.”
