The green bond market saw record new issuance of $572bn in 2024, according to research by the London Stock Exchange Group (LSEG) – a 10% per annum increase. While 2025 has brought a tougher macroeconomic and regulatory backdrop, leading to a 25% drop in green, social and sustainable bond issuance, green bonds are still considered the most reliable vehicle for sustainable fixed income.
Hannah Simons, head of sustainability at Lloyds Bank Corporate Markets, discusses the latest trends in the fixed income market, from Green, Social and Sustainable bonds to Blue and Biodiversity bonds. She also explains how regulation is continuing to shape the bond market, and how investors can ensure the bonds they invest in are not greenwashing.
Let’s take a look at fixed income market trends. What are you noticing in terms of issuance in the sustainable bond space? Has this continued to rise? How will the market volatility impact issuance?
Sustainable bond issuance remains broadly strong, despite recent market volatility.
The principles underpinning sustainable finance still ring true with issuers and investors alike, prioritising transparency and impact. According to data from Morningstar (April 2025), sustainable fixed-income funds attracted $14bn in inflows in Q1 2025, highlighting continued investor confidence in this segment despite some broader headwinds.
In this maturing market, high-quality sustainable bond issuance from repeat issuers is likely to continue.
Are there any particular areas that are seeing more issuance? Green or social, for example?
Use of proceed bonds continue represent the largest area of issuance. Within this category, green bonds dominate.
Recently, we have seen increased activity in the social bond market, across a range of different sectors from financial intuitions through to social housing. Social sustainability has historically faced challenges due to a lack of standard definition and available of data to evidence impact. This recent activity indicates that data in this space is growing.
What about blue or biodiversity bonds? Are these still a niche area?
While blue bonds are a relatively new segment of sustainable finance, the market is growing and evolving. According to T. Rowe Price (April 2025), blue bonds are the only category of sustainable bonds that have achieved continuous year-on-year growth over the past three years, with a recorded 10.6% increase in issuance year-on-year, albeit from a low base.
The market is now seeing increased participation from corporates, who became the main issuer of blue bonds in 2024. This shift has been supported by clearer industry guidelines (such as those from ICMA and IFC), sector-specific sustainable finance frameworks, and rising demand for investments linked to ocean health and clean water initiatives.
Overall, the development of standardised frameworks and data transparency is expected to further support growth and maturity in the blue bond market.
How are issuers considering the just transition in their securities?
The concept of a just transition is gaining traction as stakeholders recognise the importance of addressing both climate and social objectives in sustainable finance. However, translating this ambition into investable strategies remains challenging. Explicit ‘just transition’ bonds are still rare, but we are seeing encouraging signs: green and social bonds are beginning to incorporate broader social considerations, such as employment, education, and community resilience, alongside environmental goals.
How is regulation playing a part in this area of the market?
Regulation continues to help shape the sustainable bond market, driving greater transparency and accountability. The EU Green Bond Standard, for instance, aims to create a voluntary but rigorous framework aligned with the EU Taxonomy, providing investors with confidence that proceeds are supporting sustainable activities. At the same time, the Sustainable Finance Disclosure Regulation (SFDR) has raised the bar for asset managers by requiring detailed sustainability-related disclosures at both product and entity levels.
How can investors ensure the bonds they invest in are not greenwashing? Where is there transparency?
The voluntary guidance from the International Capital Markets Association (ICMA) is invaluable, with the significant majority of bonds issued aligning to the principle. The principles cover the types of project that may be considered eligible, best practice in evaluating and selecting projects, how to manage the proceeds and finally effective reporting, Another example is the EU Green Bond Standard mandates that proceeds be allocated to activities aligned with the EU Taxonomy, with rigorous disclosure and external review requirements. At Lloyds, we have also published our own sustainable bond framework, which shows our clients where we invest.
Where does transparency need to improve?
Transparency can be enhanced through standardized reporting and clearer definitions of sustainable activities. The ICMA guidance is extremely helpful in identifying what good looks like. The EU’s efforts, including the Corporate Sustainability Reporting Directive (CSRD) and SFDR, aim to address these gaps by mandating comprehensive ESG disclosures.
What’s your overall outlook for the fixed income space?
The sustainable fixed income market is maturing and remains resilient despite some recent volatility. Investor demand for credible, high-quality issuance is driving greater transparency helping to strengthen this market for long-term growth.
