While preliminary data for October suggest the total annual issuance for 2025 is likely to exceed 2020 levels, this would nevertheless represent the lowest annual issuance of GSSS bonds since 2021, with total issuance over 3Q2025 of just below US$600 million ($780.57 million). The 1H2025 issuance already falls below that of previous years.
According to MSCI data, the market added US$303 billion net (US$530 billion gross) worth of labelled bonds in 1H2025, 4% lower y-o-y and the lowest since 2022.
MSCI estimates full-year 2025 issuance to be at a “similar” level to 2024 — between US$900 billion and US$1 trillion.
Sorted by category, sustainability bonds and transition bonds showed some resilience, say Sustainable Fitch analysts. Issuance of sustainability bonds, a wider category of bonds that finance a combination of environmental and social projects, rose 12% q-o-q in value, while transition bonds more than doubled q-o-q.
See also: Labelled bond issuance falls 25% y-o-y to US$440 bil in 1H2025
However, transition bonds contributed “minimally” to the overall labelled bond supply and issuance was limited to Japanese entities, says Sustainable Fitch.
Japan has driven transition bond issuance since February 2024, when it launched its inaugural US$11 billion transition bond. The 10-year transition bonds were issued to fund lowcost wind power generators and aeroplanes that use alternative fuels.
Singapore’s first transition deal
See also: Why is Singapore allocating US$500 mil to Fast-P and how will it become US$5 bil?
Thanks to the Green Loan Principles launched in 2018, green loans are now well-established for financing projects that are already low-carbon or environmentally beneficial.
However, there is no equivalent framework for channelling capital toward investments needed to decarbonise high-emitting or hard-to-abate sectors.
Transition instruments are designed to support climate-aligned activities that fall outside the typical green classification. They may form just a sliver of the labelled instrument universe today, but setting out a proper definition of transition instruments should help grow this corner of the market.
It is this same spirit that led the Monetary Authority of Singapore (MAS) to launch the Singapore-Asia Taxonomy for Sustainable Finance (SAT) at COP28 in December 2023, setting out detailed thresholds and criteria for defining green and transition activities.
This gives banks the confidence to finance projects that would normally be considered emissions-intensive, such as a new gas-fired power plant, if they meet certain criteria.
Nearly two years later, YTL PowerSeraya has scored a $500 million transition finance deal from DBS Bank, Maybank and OCBC for the development of its 600-megawatt (MW) hydrogen-ready combined cycle gas turbine (CCGT) plant at Pulau Seraya Power Station, targeted to be built by end-2027.
Announced on Oct 27, the transaction is Singapore’s first transition finance deal that is aligned with the SAT and the Green Loan Principles.
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Unlike sustainability-linked loans, there are no sustainability performance targets for this $500 million transition finance loan.
But the “transition” label is not a get-out-of-jail-free card; it is also often confused with other topics, such as the energy transition.
In October, the three industry associations that designed the Green Loan Principles launched the “Guide to Transition Loans”, which contained an explainer distinguishing between two related but distinct concepts: “financing the transition” and “labelled transition finance”.
“Financing the transition refers to the mobilisation of all forms of capital, labelled and/or unlabelled, across the economy to support decarbonisation, including investments in sectors already aligned with low-carbon objectives. It represents an economy-wide movement toward a net-zero future,” reads the 19-page guide by the Asia Pacific Loan Market Association (APLMA), Loan Market Association (LMA) and the Loan Syndications and Trading Association (LSTA).
“Labelled transition finance, by contrast, is a subset of this broader effort, applicable at the transaction level. In the loan market, this may include instruments such as sustainability-linked loans, transition loans or hybrid structures, which are specifically designed to help companies, particularly those in high-emitting or hard-to-abate sectors, decarbonise over time,” they add.
The guide seeks to clarify what constitutes labelled transition finance and how it can be integrated into existing financial instruments. It also introduces the “transition loan principles” — a voluntary, cross-jurisdictional framework for use-of-proceeds transition loans at the individual asset or project level.
Borrowers seeking to transition should prioritise the actual reduction of net emissions rather than the relative reduction of emissions, reads the guide. “Where immediate reductions are not feasible… a credible interim pathway should be pursued… Regardless of interim steps, a borrower’s long-term ambition of reaching net zero should remain central.”
