Sustainable bonds: Strong 1Q26 but still –17% year‑on‑year.

Moody's new report shows that global issuance of sustainable bonds in Q1 2026 reached $241 bn – that is +18% QoQ, but still –17% YoY. Full‑year forecast remains at ~ $900 bn (similar to 2025). Europe is the dominant engine, Asia Pacific falls by a third.

Structure by type (Q1 2026):

- green bonds – dominate with 63% of volume, +5% QoQ. EU $100 bn (+41%), Asia –48%.

- social bonds – best quarter in 2 years, more than doubled to $47.6 bn.

- sustainability bonds – modest QoQ growth, but -60 % YoY

- sustainability-linked bonds (SLB) – stagnation at ~ $3 bn (chronic weakness since 2023)

- transition bonds – small segment ($4.1 bn), but fastest‑growing: +32 % YoY, +52 % QoQ.

Geographic breakdown – Europe leads:

- Europe: $137 bn (+58 % QoQ) – clear leader

- Asia Pacific: $45 bn (-35 % QoQ) – decline, mainly China

- North America: slight decline (Trump administration + SEC scrapping climate rules not helping)

Issuer mix – corporate interest falling, government rising:

- Financial institutions: 23 %

- Non-financial corporates: 25 %

- Sovereign + Agency issuers: both categories more than doubled QoQ – a big shift towards the public sector

What to take away?

1. Sustainable bonds are in a “new normal” cycle. After a rocket growth in 2020–2022 and a crash in 2023–2024, the market has stabilized around $900 bn per year. The total global bond market issues ~ $25 trn annually, so sustainable bonds now represent ~3.5 %.

2. SLB continues in a trust crisis – sustainability‑linked bonds (where the issuer promises penalties for missing ESG KPIs) are at $3 bn per quarter – they were once supposed to be the market’s future. The reason is weak KPIs, unambitious targets, low penalty rates.

3. Transition bonds are a new hot segment. Japan leads with GX (Green Transformation) bonds, but the space is open. For hard‑to‑abate sectors (steel, cement, chemicals, aviation) a transition bond is more logical than a green bond (where strict eligibility criteria simply cannot be met by a steel mill).

4. Europe is pulling. Without it the market would fall. The EU has structural advantages: EU Green Bond Standard (GBS) from 2024, CSRD/ESRS reporting, SFDR Article 8/9 funds forced to allocate. The Asia Pacific decline reflects China (economic slowdown + slowdown in green construction).

5. Czech Republic – currently has a small sustainable bond market; transition bonds represent an interesting opportunity to finance decarbonisation cheaper than traditional bonds.

6. Sovereign issuers are returning. More than a doubling of sovereign volumes is a signal that states are financing the energy transition via capital markets.

Source: ESG Today / Moody's