Green Bonds Market Expected to Reach $1,555.1 Billion by 2033

According to a new report published by Allied Market Research, titled, “Green Bonds Market," The green bonds market was valued at $582.6 billion in 2023, and is estimated to reach $1,555.1 billion by 2033, growing at a CAGR of 10.1% from 2024 to 2033.

The green bonds market refers to a niche segment of the broader sustainable bonds market where the primary goal is to fund environmental and climate-positive projects. These bonds are issued by governments, private corporations, or other organizations with the specific purpose of financing projects that address environmental issues, such as renewable energy development, waste management, sustainable forestry, and pollution reduction. The funds raised through green debt are exclusively allocated to initiatives that align with environmental sustainability goals. By investing in green bonds, investors are not only seeking financial returns but are also supporting efforts to mitigate climate change and preserve natural resources. This green bonds industry has attracted growing interest from investors who are increasingly focused on aligning their portfolios with responsible investment practices, as it offers an opportunity to contribute to global environmental goals while generating financial returns.

The green bonds market growth is attributed to regional variations in regulatory standards influencing its development. In Europe, the European Union (EU) has implemented the EU Green Bonds Regulation, effective from December 21, 2024. The Regulation is a voluntary standard for issuers of bonds which wish to use the designation "European Green Bond" or "EuGB" for bonds that are made available to investors in the European Union. The Regulation sets out eligibility criteria for investing the proceeds of bonds in environmentally sustainable projects, standards for pre-issue and post-issue sustainability reporting, and a new framework for external review of those reports, and supervision of the reviewers. Bonds which are used to finance environmentally sustainable technologies, energy and resource efficiency, as well as environmentally sustainable transport infrastructure and research infrastructure, subject to certain reporting and requirements under the Regulation, will be eligible under the Regulation to be designated as “European Green Bonds” or “EuGB”. Issuers may only use the "European Green Bond" or "EuGB" label if they publish a prospectus under the EU Prospectus Regulation. The Regulation covers financial issuers (which may “on-lend” the proceeds of their bonds to finance other companies’ projects) as well as issuers raising finance for commercial projects.

Furthermore, in December 14 2024, The European Securities and Markets Authority (ESMA) has introduced revisions to its sustainable finance regulations, allowing green bond funds to invest in bonds issued by large polluters under specific conditions. This adjustment aims to address challenges faced by fund managers in adhering to strict sustainability criteria while maintaining diverse investment portfolios. The revised rules reflect ESMA's acknowledgment of the need for flexibility in defining green investments, particularly for funds that align with environmental, social, and governance (ESG) goals. The updated guidelines aim to encourage broader participation in green finance, even from sectors traditionally associated with high carbon emissions, as they transition toward sustainable practices. This move underscores the challenges in balancing stringent regulatory standards with market realities, as the market continues to expand. By refining its approach, ESMA aims to strengthen investor confidence while fostering greater inclusivity in the sustainable finance ecosystem.

On the basis of issuer, the corporates segment dominated the market in 2023 and is expected to maintain its dominance in the upcoming years due to the increasing issuance of green bonds by private corporations to finance their sustainability initiatives, such as renewable energy projects, energy efficiency improvements, and carbon reduction strategies. This trend is driven by growing investor demand for environmentally responsible investments, corporate commitments to achieving net-zero targets, and favorable regulatory frameworks supporting green financing.

Europe has secured the largest share in the green bonds market size in 2023, owing to its stringent environmental regulations, the European Union's Green Deal initiatives, and the widespread adoption of the EU Green Bond Standard. The region's strong focus on sustainability, coupled with government incentives and policy frameworks supporting green financing, has encouraged both public and private sector issuers to tap into the green bonds market trends. Additionally, Europe's leadership in renewable energy projects, energy efficiency advancements, and climate-focused investments has further solidified its dominance in the global green bonds industry.

Key findings of the study

• By investor type, the fund manager segment led the market in terms of revenue in 2023.

• By issuer, the corporate segment accounted for the highest green bonds market share in 2023.

• By application, the energy segment accounted for the highest green bonds market share in 2023.

• By region, Europe generated the highest revenue in 2023.

The report profiles the key players operating in the green bonds market analysis such as KfW, Frankfurt Am Main, Abu Dhabi Future Energy Company, China Development Bank, Bank Of China, European Investment Bank, World Bank Group, Equinix, Inc., Deutsche Bank AG, Engie Group, Iberdrola, S.A. These players have adopted various strategies to increase their market penetration and strengthen their position in the green bonds market opportunity.