The issuance of green bonds has dropped sharply this year, with sales by governments, financial institutions, and companies falling nearly one-third, as global climate policy momentum weakens under shifting political and regulatory landscapes.
According to new data from Sustainable Fitch, labelled bond issuance—which includes green, social, and sustainability-linked bonds—declined by 25% year-on-year to $440 billion. The second quarter of 2025 marked the weakest quarterly performance since 2019.
Green bonds, which are specifically tied to financing environmental and climate-related projects, saw a $100 billion, or 32%, drop. Their share in total global bond issuance has fallen to 10.2%, down from 11.7% in 2024.
The decline follows a wave of policy reversals and delays. In the United States, President Donald Trump’s administration has pulled out of several global climate initiatives and eased domestic environmental regulations. Meanwhile, European Union lawmakers are in talks to dilute corporate sustainability reporting requirements for a large portion of businesses.
Fitch attributed the market contraction to broader macroeconomic pressures and geopolitical instability, which have injected uncertainty into capital investment plans. It also flagged that delays and backtracking on environmental, social and governance (ESG) regulations in the US and EU may be causing issuers to pause activity until there is greater clarity.
“Ongoing uncertainty over ESG-related regulations – amid implementation delays and rollbacks in the U.S. and EU – may be prompting issuers to wait for regulatory clarity,” Sustainable Fitch stated.
The data underscores the fragile state of climate finance markets and highlights how political shifts and regulatory hesitations can have swift impacts on sustainable investment flows.
