Sustainable Debt Outlook 2026: Higher issuance with changing compositions | articles
Green bonds and loans are expected to grow to US$700bn and US$255bn of issuance in 2026, respectively. They are trusted tools for funding environmental projects, following clear standards and enabling issuers to demonstrate sustainability progress. Research also finds that companies that issue green bonds tend to cut their emissions, especially among higher-emitting firms.
Green bonds and green loans are trusted tools for funding environmental projects
Moreover, as discussed in Call 3, green bonds and loans will benefit from rising power demand driven by AI, data centres, and broader electrification. These trends will increase the need for financing to expand infrastructure and improve energy efficiency.
Corporates and financial institutions are the main issuers of green bonds and loans. Despite lower YoY total issuance from corporates in 2025, the share of green bonds and loans combined has increased from 34% in 2022 to 68% in 2025. We continue to expect such a preference in 2026.
More green debt could also stem from the public sector, especially from emerging markets where governments are leading green projects to enhance industrial competitiveness, support growth, and meet climate goals. Issuance from SSAs in developed markets will likely be weaker. In Europe, they made up just under 20% of green bond issuance in 2025. While overall funding in the sector remains high, growth in green bonds may be weaker as more government spending shifts toward defence.
While green bonds and loans are the main drivers of market growth, sustainability bond issuance could also grow this year, from US$271bn to US$290bn in 2026. Supranationals and governments dominated the segment with a 77% share of the issuance in 2025. While still predominantly a dollar market with a 47% share driven by supranationals, 2025 did see a notable increase in EUR issuance, which even topped the prior 2021 record volume for the first time. The greater flexibility of the sustainable label makes it attractive for smaller issuers, which can still be a driver of growth in the segment. These smaller agencies and regional issuers accounted for more than a quarter of the issuance increase in 2025 over 2024.
Finally, we expect moderate issuance growth in transition bonds and loans this year, at a combined US$17bn, compared to lower-than-expected issuance of US$12bn in 2025. After the newer release of transition finance frameworks like China and India last year, we should expect increased issuance from them. We expect transition debt to be highly concentrated in APAC because of the number of frameworks in place in the region.
In contrast, sustainability‑linked bonds (SLBs) will continue to see weaker momentum in 2026 than project‑based sustainable finance – including green, social, sustainability, and transition bonds and loans. This is because sustainable KPIs linked to SLBs can fail to capture an issuer’s core sustainability impacts, and the financial penalties for missing targets are frequently too small to be meaningful. As a result, we expect SLB issuance to remain subdued in 2026, at around US$25bn.
But we expect sustainability-linked loans (SLLs) to do better in 2026 and reach US$160bn of issuance, up from US$139bn in 2025. Despite a similar challenge in demonstrating credibility, there can still be sizeable SLL deals in the private market, which are not captured in public databases. KPI-linked debt in general also remains a viable choice for issuers with fewer direct green capex opportunities to tap into sustainable finance.
