Green bonds remain the dominant form of sustainable debt in Asia, but their share of the market is gradually shrinking as issuers turn to a wider range of financing instruments and a sharp slowdown in China weighs on regional issuance.
Green bonds accounted for 56.5 per cent of sustainable bonds outstanding across Asean+3 markets at the end of March 2026, worth US$576.9 billion, according to the Asian Development Bank’s latest Asia Bond Monitor. That was down from a 61.6 per cent share two years earlier.
The decline in market share does not necessarily signal weakening appetite for green finance. Rather, it points to a broadening sustainable debt market as social, sustainability, sustainability-linked and transition bonds take a greater role alongside traditional green bonds, the ADB data showed.
The Asean+3 sustainable bond market – covering the 10 Southeast Asian economies as well as China, Japan and South Korea – had US$1.02 trillion of bonds outstanding at the end of March, making it the world’s second-largest regional market after the European Union. It accounted for 18 per cent of the global sustainable bond stock.
New issuance, however, weakened sharply in the first quarter.
Asean+3 sustainable bond issuance fell 31.1 per cent from the previous quarter to US$46.9 billion, its lowest quarterly level in five years, as issuance in China declined, ADB said.
The regional headline masked a more resilient picture elsewhere in Asia. Excluding China, Asean+3 issuance increased to US$32.9 billion in the first quarter from US$29.6 billion in the final three months of 2025, a rise of about 11 per cent.
That divergence highlights the outsized influence of China on regional sustainable debt volumes while suggesting that issuance is becoming more geographically dispersed.
Southeast Asian economies are also making comparatively heavy use of sustainable bonds. Such instruments accounted for 10.8 per cent of total bond issuance in Asean during the first quarter, compared with 4.5 per cent globally and 11.6 per cent in the European Union, according to ADB.
South Korea was another relative bright spot. Its sustainable bond issuance increased 7.2 per cent quarter-on-quarter to US$11.2 billion, driven largely by increased public-sector issuance of green and social bonds. Green bonds represented 29.2 per cent of South Korea’s US$184 billion sustainable bond market at the end of March, behind social bonds at 54.2 per cent.
The Asian trends come against a broader cooling in global sustainable debt issuance at the start of the year.
Climate Bonds Initiative said US$230.3 billion of green, social, sustainability and sustainability-linked debt aligned with its methodology was issued globally in the first quarter of 2026, 9 per cent lower than a year earlier on a like-for-like basis.
Green bonds nevertheless remained by far the largest segment globally. Issuance carrying the green label reached US$150.2 billion during the quarter, accounting for 62 per cent of aligned sustainable debt issuance, while cumulative aligned green bond volumes reached US$4.3 trillion.
Social bond issuance stood at US$42.9 billion and sustainability bond issuance at US$34.2 billion during the quarter, according to Climate Bonds.
More recent figures point to a sharp divergence between Europe and the United States. The Financial Times, citing Climate Bonds Initiative data, reported that a record US$242 billion of green-aligned bonds were issued in Europe in the first half of 2026, putting the region on course for a record year. Europe issued about US$374 billion of green bonds in 2025, accounting for roughly 55 per cent of global issuance, and is expected to account for nearly two-thirds of new green debt worldwide this year.
The US market has moved in the opposite direction. According to the Financial Times, US green bond issuance peaked at US$94 billion in 2021 and fell to US$77 billion last year. Just US$34 billion was issued in the first half of 2026, with issuance expected to decline for a second consecutive year amid political backlash against environmental, social and governance-labelled finance.
The contrast underscores the increasingly uneven geography of green finance. Europe’s mature market is seeing renewed issuance, while the US market is contracting and Asia’s headline performance remains particularly sensitive to fluctuations in Chinese issuance.
The data suggest Asia’s green bond market is entering a more mature phase, in which green-labelled debt remains dominant but competes with a widening range of sustainable financing products.
ADB said the share of local currency financing in the Asean+3 sustainable bond market had also climbed to 73.5 per cent at the end of March from 69.7 per cent two years earlier, although it remained below the 95.5 per cent local-currency share of the region’s overall bond market.
The combination of rising issuance outside China, greater use of local currencies and diversification beyond green bonds suggests that the region’s sustainable finance market is broadening even as headline issuance volumes remain vulnerable to swings in its largest market.
This story has been updated to add figures reported by the Financial Times.
