January 2026 | Sustainable Finance Market Highlights

Market and Regulatory Highlights

• As 2025 closes and 2026 opens, it is time to take stock of what’s happened over the past year.  Environmental Finance estimates  that the sustainable debt markets (bonds and loans) contracted by about 20% in 2025.
• While green bonds continue to lead by volume, representing more than 60% of the labelled bond market in volume, sustainability-linked bonds have continued their decline, down 24% compared to 2024 and representing only 3% of the labelled bond market in 2025, according to International Capital Market Association (ICMA) estimates.
• On the loan side, a market contraction is also expected, but the dynamics differ significantly from the bond side.  Sustainability-linked loans represent about 40% of the total labelled loan market in volume, with green loans also strongly represented (about 33% in volume), according to Environmental Finance data.
• Despite the headwinds, 2025 has again been an active year in terms of innovation and regulation, paving the way for a dynamic 2026:

• • • The Loan Market Association (LMA), in collaboration with the Asia Pacific Loan Market Association (APLMA) and the Loan Syndications and Trading Association (LSTA), published the Transition Loans Guide in October 2025. Shortly thereafter, in November, ICMA published the Climate Transition Bond Guidelines, along with an updated version of the Climate Transition Finance Handbook. Market participants have welcomed both publications, which bring long-awaited clarity and structure to the developing Transition labelled market.
    • The COP30 Climate Conference in Belém received heavy criticism for omitting any mention of fossil fuels from its final statement. The conference took place right after the publication of the new Transition market guidelines mentioned above. While the UN openly shared its strong skepticism on the ability to limit global temperature rise to 1.5C above pre-industrial levels, the sustainable debt market has new tools to push the Transition effort to the top of the agenda.
    • On the regulatory front, in November the European Commission published a “Commission Notice on the interpretation and implementation of certain legal provisions of the European Green Bond Regulation.” 2025 was the first year of implementation of the European so-called gold standard, which saw a solid number of regulated issuances. ISS-Corporate has been actively involved, having provided 10 external reviews of European Green Bond Pre-Issuance Factsheet reviews to a variety of issuers (financial institutions and corporates) as well as post-issuance reviews.