The Green, Social & Sustainability (GSS) Bond market slowed down in the third quarter of the year, marking a slight contraction of 3% in issues compared to the previous year. Despite this slight slowdown in overall volumes, the market shows notable resilience, with Green and Sustainability Bonds together representing almost 90% of total issuance in the quarter. This is what emerges from the latest GSS Bond Report by MainStreet Partners, which also analyzes the dynamics of emissions at a regional level.
Europe at the top for emissions
Europe confirms itself as the most active region, with a 40% increase in Green Bond issues compared to the same period in 2024, equal to 86% of the regional volume. In parallel, the Asian GSS market continues to grow rapidly, driven by China, South Korea and Japan, while emissions in the Americas show a decline.
“The Green Bond market continues to demonstrate resilience and maturity. Despite macroeconomic and regulatory uncertainties, activity remains sustained, with Europe consolidating its leadership and the EU Green Bond Standard already at 7% of overall European emissions”, underlines Pietro Sette, Research Director of MainStreet Partners, adding “the market is not only growing in terms of size, but also of transparency and credibility: an encouraging sign for the whole of sustainable finance”.
Climate adaptation: the missing link
This report highlights a major absence: climate adaptation. In fact, there are scarce funds to finance climate adaptation projects. Since 2018, only 1.8% of GSS Bond proceeds have been allocated to adaptation projects, despite increasing physical risks related to climate change.
Globally, 1.8 billion people now live in areas at high risk of flooding – it is underlined – while in 2024 economic losses related to drought have exceeded 13 billion dollars. Public issuers remain the main financiers of climate adaptation projects, accounting for more than 96% of Green Bond issuances for adaptation purposes between 2020 and 2024.
While interest is growing, MainStreet warns that poor data comparability and limited post-issuance reporting continue to hinder the growth of adaptation finance. Only 30% of issuers that include adaptation projects in their frameworks subsequently declare the actual allocation of proceeds.
The EU Green Bond Standard accelerates, already representing 7% of European Green Bond issues since the beginning of the year. Among the most significant issues, the sovereign debut of Denmark and the bond issued by the Finnish TVO, the first linked to the nuclear sector compliant with the new standard.
