Record-breaking growth despite political headwinds Global green bond and loan issuance reached $947 billion in 2025, a new record, even as the US under President Trump rolled back clean-energy policies and Europe scaled back environmental regulations. This suggests investor demand for climate-friendly assets has become resilient to political shifts.
AI driving demand A key factor is the nearly 4% expected increase in global electricity demand, largely driven by artificial intelligence infrastructure needs. Investors are viewing green investments less as niche ESG plays and more as core infrastructure investments with clear revenue visibility, particularly in grid upgrades and renewables tied to electrification.
Asia-Pacific leads growth The region raised $261 billion from green debt, up about 20% year-over-year. China hit a record $138 billion in green bond issuance and launched its first sovereign green bond in London. The “greenium” (lower borrowing costs for green bonds) is most pronounced in Asia-Pacific, with some issuers receiving over 14 basis points in savings.
Mixed performance across markets While clean-energy stock indexes surged 45-60% in 2025, US green debt issuance actually fell 7%. Sustainability-linked debt dropped 50% amid greenwashing concerns, and transition bonds for hard-to-abate sectors fell by more than half.
Optimistic outlook Analysts expect global green bond sales could reach $1.6 trillion in 2026, supported by easing interest rates and upcoming changes to European fund rules that will broaden what qualifies as sustainable investment.
Case Study: Resilience Amid Political Uncertainty
The Paradox of 2025
The green debt market in 2025 demonstrated remarkable resilience, achieving record issuance of $947 billion despite significant political and regulatory headwinds. This case illustrates a fundamental shift in how investors perceive climate-friendly assets.
Key Challenges Faced
Political Rollbacks
- US President Donald Trump dismantled clean-energy subsidies and backed fossil fuels
- Europe scaled back environmental regulations citing growth and competitiveness concerns
- Policy uncertainty typically dampens investment confidence
Market Concerns
- Sustainability-linked debt plummeted 50% to $165 billion due to greenwashing fears
- Transition bonds for hard-to-abate sectors halved to $10.9 billion
- US green debt issuance fell 7% to $163 billion
Success Factors
Fundamental Demand Drivers The market succeeded because investors recognized green investments as essential infrastructure rather than optional ESG allocations. The nearly 4% increase in global electricity demand, driven primarily by AI data centers, created urgent need for grid upgrades and renewable capacity.
Asia-Pacific Leadership China’s record $138 billion in green bond issuance, including its inaugural sovereign offering in London, demonstrated government commitment transcending Western policy shifts. India’s renewable energy sector attracted over $1 billion through 11 IPOs, with six more companies seeking an additional $3 billion.
Financial Incentives The “greenium” remained compelling, particularly in Asia-Pacific where issuers secured over 14 basis points in borrowing cost reductions. This tangible financial benefit reinforced the business case beyond environmental considerations.
Lessons Learned
- Infrastructure framing matters – Positioning green investments as core infrastructure attracts broader capital pools
- Regional diversification provides stability – Asia’s 20% growth offset Western market weakness
- Technology demand creates durable trends – AI’s energy requirements provide structural support independent of climate policy
- Greenwashing concerns require vigilance – The collapse in sustainability-linked debt shows investors demand credibility
Market Outlook: 2026-2028
Short-Term Projections (2026)
Bullish Scenario: $1.6 Trillion Issuance
Analysts at BNP Paribas Asset Management project green bond sales could reach $1.6 trillion in 2026, driven by:
- Easing interest rates reducing financing costs across all debt markets
- Refinancing cycle as bonds issued during the 2020-2021 surge mature
- Continued AI infrastructure buildout requiring massive grid investments
- European regulatory changes broadening eligible sustainable investments
Medium-Term Trends (2027-2028)
Market Maturation Outstanding green bonds have grown at 30% compound annual rate over five years, now representing 4.3% of global debt markets. This proportion should reach 6-8% by 2028 as green debt becomes standard practice rather than specialized financing.
Geographic Shifts
- Asia-Pacific likely to account for 35-40% of global issuance, up from current 28%
- Middle East and developing markets expanding participation as renewable projects scale
- US market recovery dependent on post-2024 election policy environment
Product Evolution The collapse in transition bonds and sustainability-linked debt creates opportunity for redesigned instruments with stronger verification frameworks. Expect emergence of:
- Technology-linked green bonds (AI data center efficiency standards)
- Grid modernization bonds with measurable capacity metrics
- Hybrid instruments combining development finance with climate objectives
Risk Factors
Potential Headwinds
- Sustained high interest rates could dampen all infrastructure investment
- Greenwashing scandals eroding investor confidence
- Geopolitical tensions disrupting supply chains for renewable technology
- Competition from other infrastructure needs (defense, traditional energy)
Structural Supports
- Corporate renewable energy commitments (many Fortune 500 companies have 2030 targets)
- Physical climate risks making adaptation investments necessary
- Energy security concerns favoring domestic renewable generation
- Technological cost curves continuing to improve solar and wind economics
Solutions: Strengthening Green Debt Markets
For Issuers
Enhanced Transparency
- Adopt standardized reporting frameworks (ICMA Green Bond Principles, Climate Bonds Standard)
- Provide quarterly impact reports with measurable metrics (MWh generated, tons CO2 avoided)
- Engage third-party verification for all green bond use-of-proceeds
- Establish clear governance structures for green financing programs
Strategic Positioning
- Frame offerings as infrastructure investments with tangible financial returns
- Highlight grid reliability, energy security, and cost stability benefits
- Target multiple investor bases (climate-focused, infrastructure, general fixed income)
- Consider inaugural sovereign or quasi-sovereign issuances to establish benchmarks
For Investors
Due Diligence Frameworks
- Prioritize projects with measurable, time-bound impact metrics
- Assess issuer track record and governance quality
- Evaluate additionality (would the project happen without green financing?)
- Monitor for “greenwashing red flags” (vague use-of-proceeds, lack of reporting)
Portfolio Construction
- Diversify across geographies to capture Asia-Pacific growth while maintaining developed market exposure
- Balance pure-play renewable developers with established utilities transitioning energy mix
- Consider entire capital structure (senior debt, subordinated, equity) for optimal risk-return
- Allocate to both project bonds and corporate green bonds for liquidity management
For Regulators & Policymakers
Market Infrastructure
- Establish clear taxonomies defining eligible green activities
- Mandate standardized disclosure requirements reducing information asymmetry
- Create incentive structures (tax benefits, preferential capital treatment for banks)
- Support secondary market development improving liquidity
Credibility Mechanisms
- Strengthen oversight of ESG rating agencies and verifiers
- Enforce penalties for misleading green claims
- Develop national green bond standards aligned with international frameworks
- Facilitate data infrastructure enabling impact measurement
For Market Infrastructure Providers
Innovation Priorities
- Digital platforms connecting project developers with green capital
- Blockchain-based verification systems for impact tracking
- Standardized data formats enabling automated ESG analysis
- Secondary market mechanisms improving price discovery
Singapore Impact & Opportunities
Current Position
Singapore has positioned itself as a green finance hub for Asia, though specific 2025 issuance figures aren’t detailed in the article. The government has committed $2.8 billion in green bond proceeds toward major infrastructure:
- Jurong Region Line
- Cross Island Line
Major Singapore banks have expanded green lending:
- DBS, UOB, and OCBC all offer green home loan products
- Singapore banks likely participating in underwriting Asia-Pacific’s $261 billion in green debt
Strategic Advantages
Regional Hub Status
- Singapore serves as financial gateway to Southeast Asia’s developing renewable markets
- Established legal and regulatory framework attracts international issuers
- Time zone and language capabilities facilitate Asia-Pacific deal flow
Government Commitment
- Green Plan 2030 provides policy certainty
- Carbon tax creates incentives for corporate decarbonization
- Sustainable finance taxonomy under development
Financial Sector Expertise
- Deep capital markets infrastructure
- Concentration of asset managers and institutional investors
- Growing ESG analytical capabilities
Opportunities for Singapore
Market Development
- ASEAN Green Bond Hub
- Facilitate issuance from Indonesia, Vietnam, Philippines renewable projects
- Provide listing venue with credible green verification
- Develop regional green bond index products
- Transition Finance Leadership
- Southeast Asia has significant hard-to-abate industries (cement, steel, chemicals)
- Singapore could pioneer credible transition bond frameworks
- Address the gap left by 50%+ decline in transition finance
- Technology-Linked Green Finance
- Capitalize on AI data center buildout in region
- Structure financing for grid upgrades supporting electrification
- Develop products linking renewable energy to tech infrastructure
Institutional Capabilities
- Verification & Rating Services
- Establish regional centers for green bond verification
- Develop Southeast Asia-specific impact assessment methodologies
- Address greenwashing concerns that collapsed sustainability-linked debt markets
- Talent & Knowledge Development
- Train green finance professionals for regional markets
- Develop case studies and best practices from successful issuances
- Host forums connecting issuers, investors, and technology providers
- Innovation Testbed
- Pilot digital green bond platforms
- Experiment with tokenized green assets
- Test blockchain-based impact verification systems
Challenges for Singapore
Scale Limitations
- Small domestic market limits local issuance volumes
- Must succeed as regional hub rather than purely domestic market
- Competition from Hong Kong, Tokyo, and emerging Shanghai
Policy Coordination
- Need alignment with diverse ASEAN regulatory frameworks
- Balance financial hub ambitions with climate commitments
- Navigate geopolitical tensions affecting regional capital flows
Greenwashing Risks
- Rapid market growth can compromise quality
- Regulatory capacity must keep pace with deal flow
- Reputation risk if Singapore becomes associated with dubious green claims
Recommended Actions
For Singapore Government
- Fast-track development of comprehensive green taxonomy aligned with international standards
- Establish Green Finance Institute as center of excellence for Asia-Pacific
- Provide tax incentives for regional green bond issuance listed in Singapore
- Mandate climate risk disclosure for SGX-listed companies, creating financing needs
For Singapore Financial Institutions
- Expand green underwriting capabilities targeting ASEAN infrastructure
- Develop specialized green credit assessment teams
- Create distribution networks connecting regional issuers with global investors
- Launch innovative products (green ETFs, retail green bonds, green REITs)
For MAS (Monetary Authority of Singapore)
- Clarify prudential treatment of green assets for banks
- Establish expedited approval processes for credible green bond programs
- Support secondary market development through liquidity facilities
- Lead regional coordination on green finance standards
Conclusion
The 2025 green debt market demonstrated that climate finance has evolved from niche impact investing to mainstream infrastructure allocation. With proper frameworks addressing greenwashing concerns and continued structural demand from electrification and AI, the market appears positioned for sustained growth toward the projected $1.6 trillion in 2026.
For Singapore, the opportunity lies in becoming the trusted intermediary connecting Southeast Asia’s renewable energy potential with global capital pools, while developing the institutional infrastructure that brings credibility to an expanding but sometimes questioned market. Success requires balancing rapid growth ambitions with rigorous standards that prevent the greenwashing collapse seen in sustainability-linked debt markets.
The Greenium
Maya Chen stared at the Bloomberg terminal, the numbers refusing to make sense. It was 3 AM in Singapore, and she’d been awake for twenty hours straight, but the exhaustion couldn’t explain what she was seeing.
“Run it again,” she told her analyst, David, who looked equally bewildered.
The screen refreshed. The numbers didn’t change.
Indonesia’s state power company had just priced their green bond at 14 basis points below comparable conventional debt. Fourteen basis points. In any other market, that would be a rounding error. But this was a $2 billion issuance from a company that, six months ago, couldn’t give away green bonds at any price.
“The greenium is real,” David whispered, almost reverently.
Maya had spent the last fifteen years in debt capital markets, and she’d learned to trust her instincts. Right now, those instincts were screaming that something fundamental had shifted.
Three months earlier, Maya had been ready to quit.
The sustainable finance team at Goldman Sachs Singapore had been her dream job once. Now it felt like arranging deck chairs on the Titanic. Trump’s second term had gutted US climate policy. Europe was backtracking. Their pipeline had dried up. Half her team had been reassigned to oil and gas.
“Face it,” her colleague Richard had said over coffee at Raffles Place. “ESG is dead. It was a nice dream while it lasted.”
But Maya couldn’t let it go. She’d grown up in Johor, watching the floods get worse each year. Her parents’ kampung house had been underwater three times in the last decade. Climate change wasn’t an investment thesis to her. It was personal.
That’s why she’d taken the meeting with Dr. Priya Sharma, even though it seemed like a waste of time.
Dr. Sharma ran a small renewable energy consultancy in Chennai. She had no banking relationships, no track record in capital markets, and a PowerPoint presentation that looked like it was made in 2005. But she had something else: data.
“Everyone’s looking at this wrong,” Dr. Sharma said, pulling up a chart that made Maya lean forward. “They think green bonds are about saving the planet. That’s the marketing. But look at what’s really happening.”
The chart showed electricity demand projections for Asia. The line went nearly vertical starting in 2024.
“AI,” Dr. Sharma continued. “Every ChatGPT query, every AI image generation, every machine learning model—they all need power. Massive amounts of power. And the grid can’t handle it.”
She clicked to the next slide. “India alone needs to add 50 gigawatts of capacity in the next two years just to keep the lights on. China needs 200. Southeast Asia needs 30. That’s not climate policy. That’s survival.”
Maya started doing the math in her head. The capital requirements would be staggering.
“The beautiful thing,” Dr. Sharma said with a slight smile, “is that solar and wind are now the cheapest power sources available. Not because they’re green. Because they’re cheap. The greenium isn’t a discount for saving the planet. It’s a discount for backing the most profitable infrastructure plays in Asia.”
Maya looked at the projections again. If Dr. Sharma was right, they weren’t looking at an ESG trade. They were looking at the biggest infrastructure boom since the Marshall Plan.
“I need to make some calls,” Maya said.
The first deal almost killed her career.
She’d convinced her managing director to let her pitch a green bond for a Vietnamese solar developer. The company was solid, the project made economic sense, but the pricing felt aggressive. She was asking investors to accept lower yields based on the premise that renewable energy infrastructure was now core allocation territory, not niche ESG.
“You’re insane,” Richard told her the night before the roadshow. “You’re pricing this like it’s a Singapore utility. It’s a Vietnamese solar farm. Investors are going to laugh you out of the room.”
But Maya had done her homework. She’d spent weeks talking to power traders, grid operators, and data center developers. She knew something Richard didn’t: there was a quiet panic building. Tech companies were signing power purchase agreements at any price. Grid operators were begging for capacity. The smart money was starting to move.
The roadshow was brutal. London investors were skeptical. New York was worse. But in Singapore, Hong Kong, and Tokyo, she found true believers. Asian infrastructure funds that understood what was coming. Sovereign wealth funds that had been waiting for exactly this opportunity.
The book built slowly, then all at once. By the time they priced, they were 4x oversubscribed. Maya had proven her thesis.
That was three months ago. Now, she was watching the market validate everything she’d believed.
The Indonesia deal changed everything.
If a state power company could achieve a 14-basis-point greenium, every CFO in Asia would be calling their investment banks by morning. Maya’s phone had already started ringing. She had twelve pitch requests waiting in her inbox, and it wasn’t even dawn.
But as she stared at the screens, watching the market digest the news, she felt a strange unease.
Dr. Sharma had been right about the economics. Green bonds had become infrastructure plays, and the money was flooding in. Her own success proved it. But somewhere in the transformation from moral imperative to financial opportunity, something had been lost.
The sustainability-linked debt market had collapsed by 50% this year. Transition finance for hard-to-abate industries had been cut in half. Nobody wanted to fund the difficult, messy work of actually transitioning the economy. They wanted clean, simple renewable energy stories that fit neatly into PowerPoint presentations.
“David,” she said suddenly. “Pull up the cement company we passed on last month.”
He looked confused. “The one trying to raise transition bonds? Boss, that market is dead.”
“Pull it up anyway.”
The cement company was based in Indonesia. They wanted to raise money to convert their kilns from coal to alternative fuels and install carbon capture technology. It was expensive, uncertain, and wouldn’t make them carbon-neutral overnight. Every investor they’d pitched had passed.
But cement was 8% of global emissions. If they didn’t figure out how to decarbonize heavy industry, all the solar farms in the world wouldn’t matter.
Maya looked at the numbers. The company was solid. The technology was proven. But they’d need a higher interest rate, a longer tenor, and investors willing to accept that transition wasn’t always pretty.
It would be a hard sell. Maybe an impossible sell. But if the green bond market was now big enough, liquid enough, and credible enough to achieve 14-basis-point greeniums on utility deals, maybe it was mature enough to handle the difficult stuff too.
She started typing an email to her managing director.
Six months later, Maya stood on stage at the Asian Development Bank’s sustainable finance forum in Manila. Behind her, a slide showed the landmark deals of 2025: Indonesia’s record green bond, India’s renewable IPO wave, and—buried in the middle—a modest $500 million transition bond for Indonesia Cement.
It had taken three months to place. They’d offered investors 75 basis points over comparable debt, the opposite of a greenium. But they’d found buyers: European pension funds with patient capital, development finance institutions, and a surprising number of Asian insurance companies that understood the long game.
The market had noticed. Six more cement and steel companies had reached out. A petrochemical giant was exploring options. The transition finance market was showing signs of life.
“The greenium was never about making money off virtue,” Maya told the audience. “It was about recognizing that climate action and economic logic could align. Solar and wind won because they became the cheapest option. Now we need to find ways to make transition economics work too.”
She saw Dr. Sharma in the audience, nodding.
“The easy money has arrived,” Maya continued. “Renewable energy is now mainstream infrastructure. That’s a victory worth celebrating. But the real test of this market is whether we can also fund the hard stuff—the industries that can’t simply switch to solar panels, the communities that need a just transition, the messy reality of actually changing how the world works.”
After the panel, Richard found her at the coffee station. He’d moved to a climate tech fund six months ago, riding the boom she’d helped create.
“Good speech,” he said. “Tough ask, though. Why would investors accept lower returns for harder problems when they can get solid yields on easy renewable deals?”
Maya smiled. “Six months ago, you told me investors would never pay a greenium for Vietnamese solar. Now we’re pricing Indonesia utilities at 14 under. Markets change when someone proves a new model works.”
She glanced at her phone. Another pitch request, this time from a Malaysian steel company.
“Besides,” she added, “I’m tired of only funding the easy victories. The planet doesn’t care about our book size or our league tables. It cares whether we actually solve the problem.”
Richard laughed. “Still idealistic after all these years?”
“No,” Maya said. “Just practical. Climate change is coming whether we finance the transition or not. I’d rather bet on the people trying to do something about it.”
She grabbed her coffee and headed back to the conference hall. She had three meetings before lunch, a roadshow to plan, and a cement company that needed someone crazy enough to believe their bonds would sell.
The greenium was real. Now came the hard part: proving it could fund not just the future we wanted, but the transition we actually needed.
Outside the windows, Manila Bay stretched toward the horizon, the water higher than it had been when the convention center was built. The city was already installing new flood barriers. Someone would need to finance those too.
Maya opened her laptop and started typing.