The sustainable bond market has been more resilient in 2025 than many believe, say Agnès Gourc, Franck Rizzoli and Frederic Zorzi at BNP Paribas. AI-related infrastructure is likely to drive the market forward in 2026
Environmental Finance: What do you see as the main drivers of issuance in the sustainable bond market in 2026?
Agnès Gourc: First, it is important to stress that the market for sustainable bonds and loans was more resilient in 2025 than many believe. Our data shows global sustainable bond issuance of a little under $890 billion last year, around just $75 billion less than in 2024. The market had been anticipating a bigger drop.
There is also a very large volume of bonds, the original green bond vintage, if you like, that are coming up for refinancing this year. We haven't seen this phenomenon as much in earlier years. There is going to be a lot of discussion in the market as to the behaviour of the dedicated green bond funds – which are a very important source of demand in the market – regarding reinvestment in the refinancing of those original green bonds.
We expect green bonds to remain the market's 'go-to' product – that's where the bulk of issuance will continue to be. In Europe, regulation is very conducive to green bond supply. That remains the case under the contemplated version 2.0 of the Sustainable Finance Disclosure Regulation.
Admittedly, we aren't anticipating a jump in issuance in sustainability-linked bonds (SLBs), but where we absolutely do see potential for growth is in the sovereign segment. In 2025, we arranged a debut SLB for Slovenia – the first from a European sovereign, although we've done a number in the Americas. We expect to see more interest in this segment in 2026.
Another factor that could drive new demand is the uptake of new types of instruments, such as transition bonds. Last year, we contributed quite extensively to both the transition bond and loan guidelines, from the International Capital Market Association and the three loan market associations, respectively. These are key documents that help issuers and investors alike with a baseline of what use-of-proceeds instruments should look like: that has been missing to date.
EF: What are investors asking for in the current environment?
Franck Rizzoli: As Agnes mentioned, we do expect green bonds to remain the focus in 2026. Asset managers are well-versed when it comes to green bonds: they know the standards, they understand how they work, and, critically, they understand how green bonds provide them with impact. That makes it very easy to sell to their own investors or clients and to allocate the bonds to different strategies. It also helps that, despite talk of a backlash, the climate transition remains a topic that draws demand from a diverse set of investors.
This is especially true given the significant expansion in infrastructure investment needed to support data centre build-out. Much of this work could, by its nature, be eligible for green bond issuance as it will fund building out power grids and green energy supply. That should provide really good momentum in terms of supply next year, and in the years beyond.
It's also important to recognise that, despite much of the discourse, ESG is not dead, and many large investors continue to look to have a positive ESG impact. It all comes down to investors' investment horizons. In terms of alpha generation, you might spend a bit of money on ESG today, but in five, six or seven years, you may well end up outperforming the market. If you're a pension fund or insurer, you're here for the long run.
EF: What are your thoughts on the uptake of bonds following the introduction of the EU Green Bond Standard (EU GBS)?
AG: There have been around 30 tranches issued so far in EU GBS formats, with a couple of repeat issues already. While the numbers aren't huge, this time last year nobody was expecting the market to have grown so quickly. It's been a very good start.
In terms of the type of issuers, it's across the whole market – corporates, sovereigns, supranationals and agencies (SSAs) and financial institutions. Among corporates, European Green Bonds (EuGBs) have not only been issued by utilities – which were expected to be the main sector taking advantage of the format – but also by transportation infrastructure, real estate and financial services, among others. It shows that various types of issuers can execute an EuGB – from that perspective, the format has been a success.
Part of the success of the EU Green Bond format has been that issuers had already done much of the work necessary in terms of demonstrating the taxonomy alignment of their business and of their green bonds
Part of its success has been that issuers had already done much of the work necessary – in terms of demonstrating the taxonomy alignment of their business, and their green bonds in particular – so they were well set up. It meant they just had to take one step forward to position themselves as leaders by issuing an EuGB.
Towards the end of the year, the European Commission published an FAQ that has unfortunately generated further questions and put a few transactions on hold. But further clarifications should release the backlog and spur further issuance, meaning that 2026 is likely to be another good year for EuGBs.
EF: The blue economy was a big topic for 2025. How do you see that market segment developing in 2026?
FR: The United Nations Ocean Conference last year in France was a big driver of interest in blue-labelled bonds. We arranged a €100 million ($118 million) blue bond for CAF, and a €30 million issue of CABEI, the Central American Bank for Economic Integration, to finance the restoration of LakeYojoa in Honduras. We also issued three blue private placements, worth a total of €75 million, against our own updated Green Bond Framework.
There is really good appetite from investors for blue bonds, and there is interest from issuers. But it is a small subset of the green bond universe. We expect it to continue to grow, but it will remain a relatively small part of the overall green bond market.
EF: What are you seeing from the SSA part of the market?
Frederic Zori: The SSA segment continues to underpin the sustainable debt market and is likely to remain the largest source of issuance. SSAs have been particularly active in sustainability and social use-of-proceeds formats, where they benefit from clear policy mandates, established frameworks and strong investor alignment.
Themes such as climate adaptation and resilience are expected to feature more prominently, reflecting the growing focus on physical climate risks and inclusive transition objectives
In 2025, SSA issuers provided much of the backbone of sustainable issuance, representing over 50% of sustainable bond market volumes, helping to sustain market depth and liquidity during periods of volatility. This consistency has been an important source of confidence for investors and has reinforced the role of the public sector as a stabilising force in the market.
Looking ahead, themes such as climate adaptation and resilience are expected to feature more prominently, reflecting the growing focus on physical climate risks and inclusive transition objectives. On this basis, we would expect the SSA sector to continue to play a leading role in sustainable debt issuance into 2026
EF: What are the priorities for transition finance in the Asia-Pacific (APAC) region in 2026 and what can the rest of the world learn from this?
AG: While Japan has been leading the way in transition finance, particularly with sovereign issuance, there is a keen interest in the theme across the region. Investments in APAC are well suited to what we call 'amber' taxonomies – not the typical 'near-zero' projects you get in green bonds, but projects that are still very useful to help put companies or sovereigns on a net-zero trajectory.
What Japan has done has been to put a high-level framework in place at the governmental level. It provides a roadmap for the decarbonisation of its economy and for the technologies that the country wants to prioritise for its transition. The government is also providing incentives for funding the necessary projects. That means it is quite easy for investors to understand where to invest for Japan's decarbonisation and for companies to fund and implement those projects.
Outside Japan, it's a bit chicken and egg, however. We need an investor base that is prepared to buy transition paper, and who value the extra transparency that labelled transactions provide. Investors need to get a good sense of what they are buying, where it fits in their portfolios, and what it brings versus conventional bonds.
Issuers, meanwhile, want to know that this is recognised by investors and that there is real demand for them to go through the work to produce a credible transition bond offering. Being among the first movers in a segment has this challenge, and we would expect increasing investor engagement to progress this over time. It is always a work in progress with new instruments.
EF: Are there any bright spots for labelled issuance in North America?
FZ: Activity has been subdued across most corporate sectors in the US over the last few years, not just in 2025. But where we see a rebound is around data centres – whether that is investment in the grid, energy consumption of data centres, or water stress management.
We should also highlight that Latin America has been very active last year, accounting for 8% of global sustainable bond issuance in 2025 (compared with 3% in 2024) and is a strong geography when it comes to blue and social thematics.
EF: Finally, what innovations do you expect to see in the market in 2026?
KR: As Fred outlined, we expect the adaptation and resilience theme to gain some traction this year, but exactly how that translates to issuance is still to be determined. As discussed, there will be more consideration of transition finance and how it can deliver meaningful impact. We are also watching nature and biodiversity, though it remains a complex area to find clear financial outcomes.
AG: We do expect to see more activity around outcome bonds, where investors take on the bonds' social or environmental performance risk. Here, every transaction is still very tailored, which means the deal flow is rather slow. But for those projects that can generate credits, in particular carbon credits, accessing funding in this way can be transformative.
This year may be one of consolidation rather than innovation. It is important that the market continues to take sustainability risks and opportunities into account in the short term, as over the medium term the topic will inevitably reach the top of the priority list again.
FZ: It's important to emphasise that the scale of investment we are expecting across AI infrastructure will doubtless shape some of the financing solutions we see. Global infrastructure investment needs will be in the tens of trillions of dollars, which eclipses the level of infrastructure investment we saw over the last 20 years. This comes on top of the drive for investment in renewable power that we have already seen. It is key that it is taken as an opportunity to invest for the future.
Agnès Gourc and Franck Rizzoli are co-heads of sustainable capital markets solutions, and Frederic Zorzi is global head of primary market, at BNP Paribas.
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