The GSS Bonds Market Trends Report, October ‘25, reveals that global Green, Social and Sustainability (GSS) Bond issuance declined by 3% year-on-year in Q3 2025. Despite this modest slowdown in overall volumes, the market continues to demonstrate strong resilience, with Green and Sustainability Bonds jointly representing nearly 90% of total issuance over the quarter.

Europe remains the largest and most active region, with Green Bond issuance surging 40% year-on-year and accounting for 86% of regional volumes. In the US, GSS issuance has steadily fallen, with the region accounting for just 2% of global issuance in 2025.

Meanwhile, Asia’s GSS bond market continues to expand rapidly, driven primarily by China, which has become the dominant player in Asia, accounting for 48% of the region’s issuance and 14% of global issuance in 2025. South Korea and Japan have also contributed significantly to growing issuance in the region.

The report also highlights the urgent need to scale up climate adaptation finance. Since 2018, only 1.8% of GSS Bond proceeds have supported adaptation projects, despite growing physical climate risks.

Today, 1.8 billion people live in high flood-risk areas, and drought-related losses exceeded USD 13 billion in 2024. Public issuers remain the main drivers of adaptation finance, accounting for over 96% of related Green Bonds.

MainStreet Partners’ July 2025 GSS Bonds Market Trends Report shows a 13% year-on-year drop in global Green, Social, and Sustainability (GSS) bond issuance in the first half of 2025, down to $495 billion. Still, Q2 issuance held steady at $250 billion, matching the same quarter last year.

Market sentiment remained cautious amid inflation, trade uncertainty, and geopolitical tension. Yet Green Bonds stayed dominant, especially in the UK, where issuance rose by 10% to $14.7 billion. Financial institutions led the UK market, accounting for 64% of issuances, nearly double the global average.

Sustainability and Social Bond volumes held firm at $131 billion and $82 billion, respectively. However, Sustainability-Linked Bonds saw their weakest first-half on record, at just $421 million.

Europe Dominates and Middle East Emerges as New GSS Bond Powerhouse despite US lowest global issuance since 2017

In a year marked by regulatory uncertainty and geopolitical turbulence, GSS bond issuances fell 25% YoY, with US GSS bond issuance reaching its lowest level in Q1 2025 since 2017.

However, Green Bonds continue to be the cornerstone of sustainable finance, according to MainStreet Partners’ latest report on market trends (GSS Bonds Market Trends Report).

Despite a global contraction in volumes, green bonds remain the most credible route for investors seeking transparency, impact, and regulatory alignment.

The status of ESG and Sustainability integration in the UK and European fund markets

The 2025 ESG and Sustainability Barometer report, which analyses over 9,500 investment strategies managed by more than 460 asset managers, evaluates key ESG and Sustainability-related trends in the European and UK fund markets. It also highlights a clear downward trend in asset manager ratings across each Sustainable Finance Disclosure Regulation (SFDR) classification and non-EU ratings.

The findings come at a time when sustainability standards and expectations have increased, alongside a pullback of several asset managers from key initiatives like the Net Zero Asset Managers initiative (NZAM) and Climate Action 100+ (CA100+), as well as a general reluctance to discuss ESG and Sustainability in the US.

MainStreet Partners’ research found that 13% of funds have failed its regulatory adherence assessment – which considers the relevant naming convention of the specific strategy together with the consistency of documentation, ensuring it is clear, not misleading, and uses fitting and targeted language.

Nearly a quarter (23%) of all Article 8 funds remain at risk of greenwashing. However, the proportion of Article 9 funds that have a greenwashing risk has reduced over time, now sitting at 3%.

2024 Green, Social, and Sustainability (GSS) Bond Issuance hit almost $1trn – highest annual figure in three years

The Green, Social, and Sustainability (GSS) Bond market reached its highest point in three years – with issuances hitting just under one trillion dollars ($910bn) in 2024, according to the latest quarterly GSS report by ESG, sustainability and impact data provider MainStreet Partners.

Social bond issuances saw the biggest increase in 2024 hitting $251bn (2023: $159bn), while sustainability bond issuance suffered the biggest drop to $152bn (2023: $203bn). Transition Bonds also saw something of a revival, displaying a significant growth in activity in 2024, particularly led by Japanese issuers.

The report also navigates the effect of ESMA’s new Paris Aligned Benchmark (PAB) and Climate Transition Benchmark (CTB) look-through approaches, where the compliance analysis is more focused on the Use of Proceeds rather than on the issuer itself.

By analysing the projects financed by each of the 5,000 bonds in its database, MainStreet Partners finds that this new regulation is highly relevant for Article 9 fund managers as they should start re-shaping their portfolios in advance, to avoid rapid adjustments concerning GSS Bonds to retain their themed-fund names.

EU Green Bond Standard – a match or a clash for the Green Bond Market? 

This edition of the report focuses on the EU Green Bond Standard (EU GBS), which will be effective from December 2024.

The EU GBS is a further anti-Greenwashing measure, coinciding with the introduction of the UK FCA’s new Sustainability Disclosure Regime. Considered a voluntary ‘Gold Standard’ for GSS Bond issuers, it aims to enhance transparency, credibility, and the market integrity of Green Bonds across the EU.

Based on MainStreet Partners’ analysis, only 23% of the current stock of Green and Sustainability Bonds could claim alignment with the EU GBS. This represents approximately $700 billion of assets.

One of the key requirements for the new EU Green Bond Standard is that the proceeds of the bond fundraising should be allocated to projects aligned with the EU Taxonomy, which is a pre-existing part of the EU’s sustainable finance framework. Based on MainStreet Partners’ analysis, for the same set of securities, the average Alignment to the European Taxonomy is 53% (62% for Green Bonds and 21% for Sustainability Bonds).

A comparison with the still low level of Taxonomy alignment at corporate level, on average at 10% across Revenue, CAPEX and OPEX, places GSS Bonds in an ever more definite position within sustainable investment funds mandates.

The EU Taxonomy aims to provide a robust, science-based classification system, setting out criteria for economic activities aligned with achieving net zero by 2050, as well as broader environmental goals

Green Bonds Lead the Charge as GSS Bond Issuance Hits $5 Trillion

The Q3 2024 GSS Bonds Market Trends Report highlights the strength of the market in 2024, with Green Bonds once again leading the way – now representing 57% of total GSS Bond issuance year to date.

In the first half of 2024 alone, Green Bond issuance reached a record-breaking $356 billion, making it the most active period for Green Bonds since the market’s inception. Europe continues to dominate, contributing $291 billion in issuance, a 13% year-on-year increase.

The Report also explores how the current regulation will affect Funds that invest in GSS Bonds. In particular, the European Securities and Markets Authority (ESMA) Guidance on the use sustainability-related terminology in fund names will require fund managers to align their portfolios with either the Paris-Aligned or Climate Transition Benchmarks, with no minor consequences for many portfolios.

The Report reveals that as many as 122 GSS bonds funds are facing a dilemma to comply with the requirements under either of the benchmarks by adjusting their portfolio positioning or face a potential name change. The majority of these funds are aligned with sustainability goals but may need to meet new benchmarks’ constraints.

Sovereigns leading the charge in the global Sustainability Agenda

The report finds that Sovereign GSS Bond issuance reached a record-breaking USD 160 billion of issuance, which accounted for almost one-third (31%) of Green Bonds issued last year.

The top beneficiary of this investment (accounting for 43% of the use of proceeds) was Clean Transportation, perhaps surprisingly receiving three-times the investment awarded to Renewable Energy projects by other, non-Sovereign GSS Bond market issuers.

While Sovereign bonds tend to tackle a greater variety of project types, including in several “underfunded” categories, their comparatively minor focus on Renewable Energy leads to a lower average Alignment with the European Taxonomy;

The difference stems mostly from the broader programs financed by governments, often providing less evidence that can be used to analyze their Taxonomy Alignment.

The status and development of ESG Integration and Sustainability in the Fund Market

This comprehensive annual report is the result of analysis conducted by MainStreet Partners’ dedicated Fund Research team, drawing on its proprietary ESG database of more than 7,700 funds/ETFs and over 83,000 individual ISINs, covering more than 350 Asset Managers with AUM totalling more than €10 trillion.

The 2024 ESG Barometer identifies trends in the European and UK funds market, highlights the value of the European ESG Template (EET) by identifying fund sector-specific sustainability trends, the relationships between ESG factors as well as identifying the leaders and laggards in terms of disclosures.

It also provides a synopsis of ESG regulatory developments and specialised research articles such as developments around ESG integration within private assets, a thematic deep dive into supply chains underlining the challenging reality of global consumption and highlights on how asset managers can look beyond company operational sustainability and understand how companies play into global ecosystems to identify companies with business models that challenge the status quo.

Climate Change Adaptation is currently under-funded in the Green Bonds Sector.

This quarterly report highlights key drivers for the allocation to Use of Proceeds and how these impact investors