Green Bonds Set For US$1tn Year Despite Data Centre Concerns

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Moody’s suggests that green bonds focused on climate change mitigation are expected to dominate the market
Moody’s Ratings forecasts continued growth in sustainable finance as tech firms seek capital for energy-efficient facilities amid political uncertainty

Data centres are consuming approximately 1% of global electricity demand, which has prompted increasing calls for regulation and more environmentally-friendly measures to be enforced. 

It is against this backdrop that has caused operators to move further towards green financing options for their facilities, as they seek to fund expansion without impacting sustainability targets.

As a result of this shift, the global sustainable bond market is expected to reach US$1tn in 2025. According to Moody’s Ratings, data centre operators and technology companies are continuing to seek capital for energy-efficient facilities.

Driving green bond growth

The forecast from Moody’s Ratings comes as investments in energy and water-efficient data centres emerge as a significant driver of green bond issuance. 

Moody's Ratings

“Investments in energy and water-efficient data centres, nuclear energy projects and emerging green technologies for hard-to-abate sectors could bolster green bond volumes further," Moody’s explains.

Green bonds, which are a type of debt issued by public or private institutions to finance themselves. These financial instruments require issuers to direct capital towards projects with measurable environmental benefits, such as renewable energy infrastructure or energy-efficient building systems. 

They also commit the use of the funds obtained to an environmental project or one related to climate change.

Such growth of green bonds is continuing despite the withdrawal of several banks from their environmental commitments, including CitiGroup, Goldman Sachs, Wells Fargo, Bank of America and Morgan Stanley - who have all left the UN-founded Net Zero Banking Alliance.

Looking ahead, Moody’s suggests that green bonds focused on climate change mitigation are expected to dominate the sustainable bond market overall in 2025 and are projected to reach US$620bn in 2025. 

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Iberdrola is a key example of a business that has embraced green bonds – even issuing its own issue brand: the Green Bond Principles.

The core ideas are:

  • The funds will be used for green projects that will have a beneficial effect on the environment
  • The issuer of a green bond must transparently notify the investors of the environmental sustainability goals, allowing them to be assessed and externally reviewed
  • The funds management will be appropriately and transparently controlled by the issuer, which will allow an auditor to perform a complementary review
  • The issuer of this type of bonds will periodically update the information about how the funds are used and the environmental benefits obtained.

Shaping global markets

Moody’s expects the sustainable bond market to be impacted in different ways around the world. It charts the following changes:

Europe: Europe remains the largest market for sustainable finance, having implemented the European Green Bond Standard in late 2024. This move is expected to drive volume to US$465bn, with the standard establishing a clear criteria for green bonds - which includes environmental impact and external verification. 

Sustainable bonds by global region

Asia-Pacific: The Asia-Pacific region is forecast to issue US$238bn in sustainable bonds, with transition finance for existing infrastructure becoming a priority. 

North America: Issuance in North America is expected to reach US$124bn, representing a 30% decrease from 2021 levels.

Latin America and the Caribbean: Issuance could rebound in 2025 in these areas, largely driven by COP30 in Brazil and increased activity from regional issuers.

Middle East and Africa: While accounting for the smallest share of sustainable bond issuance, this region’s focus on clean energy investments and carbon transition risks could support long-term growth.

Sustainable bonds

The sustainable bond market also includes several categories beyond traditional green bonds. 

For instance, social bonds, which fund projects with societal benefits, are forecast to decline 9% to US$150bn. Sustainability bonds, combining environmental and social objectives, are expected to remain stable at US$175bn.

Additionally, transition bonds, introduced in 2024 with Japan's US$11bn issuance, are forecast to remain at US$20bn. 

Moody’s highlights that sustainability-linked bonds are projected to grow 14% to US$35bn, below the US$80bn annual average recorded between 2021 and 2023.

“Nature-related projects are gaining traction, driven by an increasing emphasis on ecosystem conservation and biodiversity to combat global warming,” Moody’s explains.


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