EM sustainable bond issuance has fallen by double digits year-on-year in the first half of 2025, down 33%, according to S&P Global Ratings.
Emerging and frontier market (EM+) sustainable bond issuance has slowed in the first half of 2025, with global uncertainty affecting investor sentiment, according to S&P Global Ratings.
The report shows that sustainable bond issuance fell by 33% year-on-year in the first half of 2025. EM countries accounted for 12% of global sustainable bond issuance over the same period, the report said.
S&P predicts EM sustainable bonds to account for 10-15% of global sustainable bond issuance in 2025. This is a slight decline from the relative proportion of EM sustainable bonds from 2020 to 2024, which was over 15%.
Despite EM+ sustainable bond issuance faltering in recent months, EM sovereigns and corporates are continuing to prepare pipelines of labelled bonds, supported by regulatory advances in some jurisdictions, according to S&P.
These moves could set the stage for a rebound once certain macroeconomic headwinds, such as interest rate volatility, inflationary pressures and geopolitical tension, begin to ease, the report stated.
Speaking to Impact Investor, Rafael Janequine, director of sustainable finance at S&P Global Ratings, reiterated that the more constrained sustainable debt market has been primarily influenced by ongoing global macroeconomic and geopolitical uncertainties
“These factors are likely to impede progress in the short term, particularly this year. However, it is important to note that these markets are making significant strides toward creating a more transparent and supportive regulatory environment,” said Janequine.
Janequine added that issuers are actively developing sustainable financing frameworks to seize future issuance opportunities, which he believes will support medium-term growth in sustainable financing across emerging markets.
Energy transition and climate adaption
For the energy transition, the outlook is more encouraging than for climate adaptation, according to Janequine.
“Generally speaking, a significant portion of resources allocated to green projects is directed toward energy transition,” Janequine said.
“While climate adaptation remains at the bottom of the priority list, it is noteworthy that an increasing number of financing frameworks are beginning to incorporate the climate adaptation project category. That said, actual project financing in this area is still relatively small in volume and tends to be more concentrated in the public sector, primarily due to the challenges of making adaptation projects commercially attractive to private investors,” he added.
S&P’s research pointed to recent deals from Engie Peru and Companhia Brasileira de Alumínio as key milestones for integrating adaptation related key performance indicators (KPIs) into labelled debt structures. However, the firm also found that adaptation finance remains a fraction of total sustainable debt volumes in EMs.
From a net-zero perspective, the report warns that this move towards energy transition, and away from resilience-building, could exacerbate climate vulnerability in EMs. However, S&P said that the continued development of adaptation KPIs, coupled with regulatory reforms and framework building, suggests that the funding mix could become more balanced over time.
Looking ahead, the report expects unpredictable US trade policy to remain an important factor influencing macroeconomics and financing conditions across EMs. However, some markets are making significant progress towards establishing a more supportive and transparent regulatory environment, which should foster medium-term growth for EM+ sustainable financing, the report said.
