Emerging Market Green Bonds - Report 2024

Elevated Uncertainty Complicates Short-Term Forecasts, Despite a Robust Long-Term Outlook 

At the time of writing (April 2025), the global economy faces heightened levels of uncertainty, making it challenging to forecast near-term issuance of green, social, sustainability, and sustainability-linked (GSSS) bonds in emerging markets.¹ That said, some underlying market drivers are apparent, such as a likely pickup in new issuance to refinance existing debt that is reaching maturity. GSSS bonds are a relatively young asset class, established with the first green bond transactions more than a decade ago. Approximately $330 billion of those bonds will soon come to maturity and will need to be replaced over the next three years. On the other hand, three factors are likely to constrain new GSSS bond sales. First, weaker global economic growth amid turmoil in the global trading system. Second, recent regulatory changes in Europe such as new rules on how funds are named that are intended to curb greenwashing (misstating the extent to which financial instruments meet sustainability criteria), could reduce the number of sustainable funds that buy GSSS assets. Third, interest in sustainable investing may have peaked in several countries, adding uncertainty to projected flows of finance to fund technological upgrades and sustainable development in emerging markets. 

Over the longer term, the outlook for GSSS bonds in emerging markets is more robust. Annual investments in clean energy that deliver greater efficiency and more secure energy supply are likely to double in the coming years, creating a strong foundation for sustainable finance markets. This growth is likely to be supported by an increasingly competitive renewable energy sector and ambitious commitments by multilateral institutions and other development finance institutions aligned with COP29 targets. 

Global GSSS Bond Issuance Reached $1 Trillion, a Record High, in 2024 

This analysis shows that global GSSS bond issuance hit an all-time high of over $1 trillion in 2024 on a gross basis, up 3 percent from a year earlier. However, the asset class’s share of total fixed income issuance declined to 2.2 percent in 2024 from 2.5 percent the previous year. Nevertheless, this remains well above the level of 0.G percent seen in 2018.

Within emerging markets, GSSS bond sales fell 14 percent year-on-year. Much of this decline can be attributed to lower issuance in China as local borrowers attracted to cheaper financing shifted to conventional bonds in the onshore market. Another factor behind the market retreat was a 23 percent contraction in overall fixed income issuance in emerging markets outside China amid weaker economic growth in Asia and Europe. Despite this, GSSS bond penetration, or the asset class’s share of the broader bond market, amounted to more than 5 percent in emerging markets outside China, a new record and ahead of the rates seen in China and in developed markets. 

In terms of pricing, the so-called green premium or “greenium” (a yield discount for issuers of GSSS bonds that reflected high investor demand for sustainable assets as opposed to conventional bonds) more than halved to an estimated 1.2 basis points in 2024, according to Amundi calculations. For emerging markets, meanwhile, the greenium effectively disappeared in 2024 as supply caught up with demand for this type of asset.

Increasing Diversification 

Cumulative global GSSS bond issuance over the last seven years (2018–2024) reached $5.1 trillion. Over this period, emerging market issuers contributed around $800 billion to the tally, or about 1G percent. A key driver behind this growth is the energy transition away from traditional carbon-based power generation toward newer and more efficient technologies. Clean energy investments in emerging markets have surged over 70 percent since 2018, with China alone experiencing a 170 percent increase. Investor appetite has also intensified markedly. Sustainable funds have hit $3.G trillion of assets under management in 2024—up from $1.4 trillion in 2018—with fixed income allocations within investment portfolios rising to 22 percent. Additionally, multilateral institutions channeled $238 billion of climate finance to emerging markets between 201G and 2022, according to the OECD.

The GSSS bond market is also experiencing significant diversification. Although green bonds have long dominated GSSS emerging market bond issuance, there is a growing shift toward sustainability bonds (see Box 1). This trend is pronounced among multilateral institutions and, more generally, among issuers outside China that are seeking the flexibility of sustainability bonds to finance both environmental and social projects. After a period of decline since the COVID-19 pandemic as demand for healthcare funding contracted, social bond sales have stabilized to represent G percent of overall GSSS bond issuance in emerging markets between 2022 and 2024. In contrast, sustainability-linked bonds experienced a sharp decline. This may reflect mounting criticism of their design shortcomings and weak penalty structures which do not always effectively incentivize issuers to meet the sustainability targets set out in the assets’ terms.