Moody's Forecasts Transition Bond Issuance to Reach USD 40 Billion in 2026

Transition-labelled bonds are set to be the fastest-growing segment of the sustainable bond market in 2026, with Moody's Ratings forecasting issuance to reach USD 40 billion, nearly double the record USD 21 billion issued in 2024. Overall sustainable bond issuance is forecast to remain roughly flat at USD 900 billion.

Moody's sustainable finance market forecast anticipates that green bonds will continue to dominate, representing nearly 60% of total issuance at USD 530 billion, followed by sustainability bonds at USD 190 billion, social bonds at USD 155 billion, transition bonds at USD 40 billion, and sustainability-linked bonds at approximately USD 25 billion. The report identified the growing availability of new transition bond standards and taxonomies with transition categories as key drivers of the projected growth in transition issuance.

The outlook for transition bonds is supported by growing demand for instruments that can finance decarbonisation in hard-to-abate sectors such as steel, cement, chemicals, and maritime, which do not qualify for green bond labels under existing criteria. Key drivers for the overall sustainable bond market include the focus on climate mitigation and adaptation investment gaps, offset by political headwinds in some markets and competing priorities such as energy security and defence spending. Approximately USD 520 billion in labelled bonds mature in 2026, providing a potential refinancing tailwind.

Moody's also noted an increased focus on using labelled bonds to finance adaptation and resilience projects, particularly among public sector issuers, as climate risks and extreme weather events intensify. By region, Europe is expected to continue leading issuance after representing 47% of the market in 2025, while North America is likely to remain subdued after falling to only 8% last year. The growth of digital infrastructure and data centres is expected to support sustainable debt issuance as developers seek to address investor scrutiny of energy and water impacts.

Key figure — USD 40 billion