Emerging Market Green Bonds Report 2024: High Uncertainty Complicates Short-Term Forecast

Amundi and IFC , entities of the World Bank Group , have presented their annual report on emerging market green bonds . Social, Sustainability and Sustainability-Linked bonds (GSSB) are a relatively new asset class, born just over a decade ago with the first green bond deals. At the time of writing (April 2025), the global economy is characterized by a high level of uncertainty, which makes it difficult to predict the near-term issuance of GSSS bonds in emerging markets. That said, the market drivers are clear, such as the likely resurgence of new issuance to refinance around $330 billion of bonds that are coming to maturity in the next three years. On the other hand, three factors could hold back the issuance of new GSSS bonds: weaker global economic growth, recent regulatory changes in Europe and negative investor sentiment on ESG.

In the long term, the outlook for GSSS bonds in emerging markets remains strong . Annual investment in clean energy, which ensures greater efficiency and security of supply, is set to double in the coming years. This growth is likely to be supported by an increasingly competitive renewable energy sector and ambitious commitments from multilateral institutions.

Global GSSS bond issuance reached all-time high of $1 trillion in 2024

The analysis shows that global GSSS bond issuance reached a record high of over $1 trillion on a gross basis in 2024, up 3% from the previous year. However, the share of this asset class in total fixed income issuance fell to 2.2% in 2024 from 2.5% in the previous year. This is still well above the 0.6% recorded in 2018.

In emerging markets, GSSS bond sales fell 14% year-on-year . Much of this decline was attributable to reduced issuance in China, where local issuers have moved to traditional bonds in the onshore market. Another factor behind the market decline was a 23% contraction in overall fixed income issuance in emerging markets outside of China, amid slowing economic growth in Asia and Europe. Nonetheless, GSSS bond penetration in emerging markets outside of China exceeded 5%, a new record that exceeds rates in China and developed markets.

From a pricing perspective, the so-called green premium or “greenium” (a discount on yield for GSSS bond issuers) has more than halved, from 2.5 basis points in 2023 to 1.2 basis points in 2024, according to Amundi calculations . For emerging markets, however, the greenium has virtually disappeared in 2024, as supply for this asset class has caught up with demand.

An increasing diversification

Cumulative global GSSS bond issuance between 2018 and 2024 reached approximately $5.1 trillion. Emerging market issuers contributed approximately $800 billion, or 16%, over this period. One of the key drivers behind this growth is the energy transition from carbon-based energy generation to cleaner alternative forms or technologies. Clean energy investment in emerging markets has increased by more than 70% since 2018, with China alone recording a 170% increase. Investor interest has also intensified significantly. Sustainable funds reached $3.6 trillion in assets under management in 2024, up from $1.4 trillion in 2018, with fixed income allocations in investment portfolios increasing by 22%. Furthermore, according to the OECD, from 2016 to 2022, multilateral institutions have allocated $238 billion in climate finance to emerging markets.

Yerlan Syzdykov, Global Head of Emerging Markets at Amundi , said: “The GSSS bond market is experiencing significant diversification. While green bonds have long dominated GSSS emerging market bond issuance, there is a growing shift towards sustainability bonds. This trend is particularly strong among multilateral institutions and, more broadly, issuers outside of China who are seeking the flexibility of sustainability bonds to finance both environmental and social projects.”

Following the end of the COVID-19 pandemic , demand for healthcare financing has progressively contracted, leading to a stabilization of social bond sales.

This asset class represents 6% of total GSSS bond issuance in emerging markets between 2022 and 2024. In contrast, sustainability-linked bonds have seen a sharp decline. This may reflect growing criticism of their design shortcomings and weak sanctioning structures, which do not adequately incentivize issuers to meet the sustainability targets set in the terms of issuance.