Green & Sustainable Finance 2024: A Review and Outlook for 2025
2024 proved to be a year of rapid growth and significant innovations in the field of green and sustainable finance. Driven by regulatory measures and an increasing focus on sustainability, sustainable financial products such as green bonds and social bonds have grown considerably. The following provides an overview of the most important developments and trends in 2024 and an outlook on expectations for 2025.
1. Overview 2024: Growing market diversity and increasing investor interest
Institutional investors showed increased interest in Green & Sustainable Finance in 2024. With the implementation of the EU Taxonomy and the Corporate Sustainability Reporting Directive (CSRD), companies are increasingly forced to choose sustainable financing options to meet growing environmental and social responsibility requirements. This led to a rise in the market for sustainable financial products, which accelerated significantly in Europe.
Growth and Volume of Green & Sustainable Finance in Europe (2024)
| Sustainable financial products | Market size and estimated growth (2024) |
|---|---|
| Green Bonds | EUR 450 billion (+30%) |
| Social Bonds | 150 billion EUR (+20%) |
| Sustainability-Linked Bonds | 200 billion EUR (+25%) |
| Sustainable Loans | 100 billion EUR (+18%) |
Source: Market analyses, estimated volume figures for 2024
2. Challenges and regulatory developments in 2025
The tightened regulatory requirements forced issuers to improve their transparency and data collection to comply with the new sustainability standards. The introduction of the CSRD and the expansion of the EU taxonomy placed high demands on data quality and availability and increased the pressure to avoid greenwashing . Issuers often had to adapt their data structures and reporting systems to ensure the required disclosures.
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Data availability and quality : Many issuers have had to expand their data systems to meet increased requirements.
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Greenwashing risk : Investors and regulators are increasingly relying on higher standards to avoid false sustainability representations.
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Regulatory uncertainties : The planned extensions of the EU taxonomy have led to uncertainty among many companies regarding the correct implementation.
3. Spread development for ESG-related covered bonds
ESG-linked covered bonds recorded tighter spreads than conventional covered bonds in 2024. The so-called “greenium” (lower return for comparable risk) averaged 5-15 basis points as institutional investors increasingly demanded ESG-compliant investments. Green bonds and sustainability-linked bonds in particular benefited from these spread advantages.
Spread development for covered bonds with ESG focus (2024)
| Covered bond type | Spread compared to conventional covered bonds | Average spread (in basis points) |
|---|---|---|
| Green Covered Bonds | -5 to -15 basis points | 10 basis points tighter |
| Social Covered Bonds | -3 to -10 basis points | 7 basis points tighter |
| Sustainability-Linked Covered Bonds | -5 to -12 basis points | 9 basis points tighter |
| Conventional Covered Bonds | 0 basis points | reference value |
Source: Market analyses, 2024
4. Largest ESG issuers 2024
Some of the largest issuers of ESG bonds in 2024 came from the EU and the US, led by the European Investment Bank (EIB) and KfW Bankengruppe . These institutions have been at the forefront of financing sustainable projects and have contributed significantly to the development of the ESG market.
Largest ESG issuers in 2024 (by volume)
| Issuer | Country | ESG volume (in billion EUR) | Main category (Green, Social, etc.) |
|---|---|---|---|
| European Investment Bank (EIB) | EU | 45 | Green Bonds |
| KfW Banking Group | Germany | 38 | Green, Social Bonds |
| Société Générale | France | 30 | Sustainability-Linked Bonds |
| Nordic Investment Bank | Nordic countries | 28 | Green Bonds |
| Bank of America | USA | 25 | Green, Social Bonds |
| World Bank (IBRD) | Global | 22 | Green Bonds |
Source: Market analyses, 2024
5. Outlook for 2025: Trends and Expectations
The year 2025 is expected to bring further growth and additional impetus in the field of green and sustainable finance. The EU taxonomy could be expanded to include social and economic aspects, which could encourage new investment products, such as blue bonds for the preservation of biodiversity. In addition, the requirements for ESG reporting and transparency are expected to continue to increase, forcing companies to optimize their data availability and quality.
| Expected trends for 2025 | Description |
|---|---|
| expansion of the EU taxonomy | integration of social and economic aspects |
| focus on biodiversity | introduction of new bonds such as Blue Bonds |
| transparency and ESG reporting | Increased data collection and reporting |
Conclusion: Sustainability as the core of investment strategies
Green & Sustainable Finance has established itself as an integral part of the capital markets in 2024 and will continue to be in high demand in 2025. With increasing regulatory requirements and rising demand for ESG-compliant investments, the importance of sustainable investment strategies continues to grow. Companies that rely on sustainable financing instruments have the opportunity to strengthen their market position and secure long-term sources of capital.
For investors and financial institutions who would like to deal with ESG criteria and regulatory developments in more detail, S+P Seminars offers training courses on “Asset Management” and other relevant topics. These seminars provide in-depth knowledge and current market analyses that can support the integration of ESG standards into investment decisions.