Green bond records are being shattered in 2023, but with new regulations in Europe, how will the market react?

With new policies due at the end of 2023, green bonds will be required to have 85% of funds directed to projects that meet green taxonomy requirements; this could greatly stunt the European green bond market.
August 8, 2023

The first half of 2023 has broken records for the issuance of green bonds

Source: InnoEm

According to research by the international law firm Linklaters, which used statistics from Bloomberg, the first half of 2023 saw a record amount of $351 billion in worldwide green bond issuance. In total, 1758 different sustainable bond instruments totalling $568 billion were issued in the first half of this year. With 935 green bonds issued, green bonds kept dominating the market for sustainable bonds.[i] Green bonds are projects like renewable energy, energy efficiency, clean transportation, green buildings, wastewater management and climate change adaptation. The total sustainable bonds are higher than the total green bonds as this total includes social bonds, which include projects such as food security and sustainable food systems, socioeconomic advancement, affordable housing, access to essential services, and affordable basic infrastructure.[ii]

New regulations will come into effect in Europe this year

With 448 green bonds issued this year and a total of $190 billion raised, Europe has maintained its position as the world's largest market for green bonds. This is true despite the fact that the EU's regulatory environment is changing, and its Green Bond Standard is set to be adopted this September. The new voluntary regulations were agreed upon earlier this year and seek to ensure that at least 85% of the projects funded by a green bond will meet EU standards on green taxonomy.[iii] This supervisory endeavour follows a global issue with greenwashing in the green bond market. In China, the Climate Bonds Initiative says that 38% of green bonds do not meet the definition of a green bond.[iv] Closer to Europe, where the new laws will be introduced, Danske Bank says that in the Nordic region, only 14% of the 75 companies surveyed were aligned with the upcoming enforced taxonomy.[v] If these figures represent the average practice across Europe, then under the new regulations, green bond issuance could fall to between $72.2 billion and $26.6 billion, representing a huge stumbling block for the EU’s net zero ambitions. At a more practical level, access to green bonds could fall as a result of tightening definitions, and that means that, internally, businesses must be acutely tuned in to what constitutes a green bond and what does not. For businesses that do respond to the changes of the principles that govern green bonds, there may be an increased financial incentive for purchasing them. Alliance Bernstein state that the growth in the issuance of green bonds means that diversification has led to a lower average rating, and as such, a contraction could steer the market towards higher quality bonds, meaning that those with the environmental nous to know which investments will best serve the planet may find that it is not just the planet that is served but their own bottom line.[vi] This concept highlights the value of engaging with the voluntary high standard of the new EU conventions.

Some suggest that this added value will not be enough to force out low-quality bonds from the market. Thierry Philipponnat, chief economist of Finance Watch, a campaign group, posed the question to the Financial Times “What’s the logic of an optional regulation?”.[vii] Whilst it’s almost certain Mr Philipponnat’s question is a rhetorical one, an answer could be found if the increased value of high-quality green bonds were better communicated to those that will be buying them.   


[i] Linklaters- Global green bond issuance reaches record high of $351bn in first six months of 2023 amid evolving regulatory landscape

[ii] PIMCO- Understanding Green, Social and Sustainability Bonds

[iii] European Commission- Sustainable Finance: Commission welcomes political agreement on European green bond standard

[iv] Financial Times- New standards keep the greenwash off green bonds

[v] Danske Bank- Sustainable Finance Weekly

[vi] Alliance Bernstein- Understanding Green Bond Performance in Market Setbacks

[vii] Edie- Global green bond issuance reaches record levels


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Oscar Pusey
Research Analyst

Oscar is a recent graduate with a background in earth science. He is currently studying an MSc focussing on disaster responses, emergency planning and community resilience. His postgraduate research project will assess the link between climate crisis risk perception and attitudes to green energy projects. “Adapting to the climate crisis through the pursuit of net zero requires community engagement and understanding. Zero Carbon Academy’s goals closely align with this approach and I’m excited to have the opportunity to research and communicate a variety of topics relating to our environment and sustainability”.

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