Labelled bond issuance fell 25% y-o-y to US$440 billion ($566.37 billion) in 1H2025, with market share dropping to 10.2% of global debt, according to a July 23 Sustainable Fitch report. In fact, 2Q2025 issuance was the lowest since 2019.
According to analysts William Attwell, Nneka Chike-Obi, Miellisa Cheok and Jonathon Smith, ongoing uncertainty over ESG-related regulations, amid implementation delays and rollbacks in the US and the European Union, may be prompting issuers to wait for regulatory clarity.
Among green, social, sustainability and sustainability-linked (GSSS) bonds, issuers appear to be favouring established labels as the market recalibrates, such as green or social bonds.
Still, green bond issuance fell by 32% y-o-y in 1H2025, while social bonds saw a 44% decline.
Sustainable Fitch recorded “even sharper decreases” among less established labels, such as sustainability-linked bonds (SLBs) and the newer category of transition bonds, suggesting issuers may be favouring more established labels during a period of heightened uncertainty.
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Sustainable Fitch did not provide a breakdown by label, but in 1Q2025, Moody’s recorded $129 billion of green bonds, $33 billion of social bonds, $55 billion of sustainability bonds, $6 billion of SLBs and $3 billion of transition bonds issued.
Australia’s transition bonds taxonomy
Transition bonds are exclusively used to finance or refinance projects that support the issuer’s climate transition strategy.
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For example, Australia’s voluntary sustainable finance taxonomy, published in June, includes transition activities and “green-enabling technologies” while balancing the financing needs of its resource-based economy, write analysts.
The taxonomy references local scenarios and addresses the growing demand for localised decarbonisation pathways, covering six sectors and more than 70 sub-sector activities.
The taxonomy’s approach to transition also recognises that sectors are not homogenous in their decarbonisation and greening efforts, say Sustainable Fitch’s analysts.
“This means it acknowledges that different industries face unique challenges and opportunities when reducing their environmental impact. The inclusion of domestically vital sectors also demonstrates the country’s efforts to balance sustainable performance with economic needs.”
Sustainable Fitch’s analysts expect a corresponding rise in labelled debt issuance from Australia as the taxonomy provides more detailed sectoral guidance, particularly for hard-to-abate industries.
“Sectors that had previously struggled to access sustainable finance at scale could now tap the sustainable debt market to raise funding for decarbonisation and transition initiatives. This could deepen liquidity in Australia’s sustainable finance market and expand the range of activities supported by labelled debt instruments.”
Growth areas
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Sustainable Fitch thinks “social-themed activity” could be an area of growth, especially via orange bonds.
Orange bonds get their name from the colour assigned to the United Nations’ fifth Sustainable Development Goal (SDG): gender equality. It aims to mobilise the trillion-dollar global bond market to build a gender-empowered financial system that embraces inclusion by valuing the full and meaningful participation of women, girls and the LGBTQI+ community.
Overall social bond issuance in 1Q2025 was down by 19% y-o-y to US$42.9 billion.
Still, social-themed debt could prove more resilient than other categories, say Sustainable Fitch’s analysts.
“Despite a decline in social bond issuance in 1H2025, sustainability bonds, which often include a social component, have shown some resilience, decreasing by only 13% y-o-y. Anecdotal evidence shows rising investor interest in social-themed bonds.”
Charts: Sustainable Fitch, EF data