Amundi: Green and sustainable bonds fall in emerging markets, but outlook is solid

Global issuance of Green Social, Sustainability and Sustainability-Linked (GSSB) bonds reached a record high of over $1 trillion on a gross basis in 2024, up 3% from the previous year. However, in emerging markets , sales of GSSS bonds fell 14% year-on-year. Much of this decline was attributable to reduced issuance in China, where local issuers have turned to traditional bonds in the onshore market, according to the seventh edition of the Emerging Market Green Bonds Report presented by asset manager Amundi and IFC , a World Bank Group entity.

Another factor behind the market decline was a 23% contraction in overall fixed income issuance in emerging markets outside China, amid slowing economic growth in Asia and Europe, the paper said. Nonetheless, GSSS bond penetration exceeded 5% in emerging markets outside China, a new record that exceeds rates in China and developed markets.

Over the longer term, the outlook for GSSS bonds in emerging markets remains strong, the report says. Annual investment in clean energy, which enables 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.

“The GSSS bond market is experiencing significant diversification,” said Yerlan Syzdykov , Global Head of Emerging Markets at Amundi. “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.”

At the time of writing, in April 2025, the level of uncertainty in the global economy is evident, making it difficult to predict the near-term issuance of GSSS bonds in emerging markets. However, according to the paper, the market drivers are still evident, such as the likely resumption of new issuance to refinance approximately $330 billion of bonds that are coming to maturity in the next three years. On the other hand, three factors could dampen the issuance of new GSSS bonds: weaker global economic growth, recent regulatory changes in Europe and negative investor sentiment on ESG.

The analysis showed 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 asset class’s share of 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.

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

In emerging markets, GSSS bond sales fell 14% year-on-year. Much of this decline was driven by lower issuance in China , where local issuers have been moving to traditional bonds in the onshore market. Another factor driving 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.

On the pricing side, 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, greenium has virtually disappeared in 2024, as supply for this asset class has caught up with demand.

Cumulative global issuance of GSSS bonds between 2018 and 2024 reached approximately $5.1 trillion . Over this period, emerging market issuers contributed approximately $800 billion , or 16%. One of the key drivers behind this growth is the energy transition from carbon-based energy production to cleaner alternative forms or technologies.

Clean energy investments in emerging markets have increased more than 70% since 2018, with China alone seeing a 170% increase. Investor interest has also intensified significantly. Sustainable funds are set to reach $3.6 trillion in assets under management in 2024, up from $1.4 trillion in 2018, with fixed income allocations in investment portfolios increasing 22%. Additionally, multilateral institutions have allocated $238 billion in climate finance to emerging markets from 2016 to 2022, according to the OECD.

Since the end of the COVID-19 pandemic, demand for healthcare financing has progressively contracted, leading to a plateau in 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.