current
Sustainable Bank Bond Issuance
Sustainable bank bond issuance is expected to decline in 2025, reflecting lower overall issuance volumes and modest growth in sustainable loan portfolios.
Timeframe
near-term
Categories
Subcategories
Impact areas
Detailed Analysis
The supply of EUR sustainable bank bonds is projected to decrease to around €70bn in 2025, primarily due to lower overall issuance volumes and slower lending growth. Green bonds are expected to remain the dominant use of proceeds type, while social bond issuance continues to face challenges. The introduction of the EU Green Bond Standard offers a new avenue for green bond issuance, but its uptake is expected to be limited initially due to low green asset ratios reported by banks. Regulatory initiatives, such as the EPBD, are expected to drive growth in Taxonomy-aligned assets over time, but their impact in 2025 will be modest.
Context Signals
ESG bond issuance by banks in 2024 is likely to end the year close to €75bn, down from previous years.
Green issuance represents the bulk of ESG supply, with a share of 79%.
The average Taxonomy alignment of bank balance sheets is low, ranging from 1% to 8%.
Edge
Banks might focus on improving the Taxonomy alignment of their lending portfolios to facilitate greater issuance under the EU GBS.
Investor demand for sustainable bonds could influence the pricing and issuance dynamics of both green and social bonds.
Innovative financing mechanisms and partnerships could emerge to support the growth of sustainable finance.
