Q2 FY25 Sustainable Finance Market Update
June 2025 marked a major milestone for Australia’s sustainable finance sector, with the release of the Australian Sustainable Finance Taxonomy. Below, our market update will provide you an informative overview of the Taxonomy, who it’s for and how it’s likely to be used. Continue reading for updates on recent transactions, other sustainable finance news and a spotlight on Women in Sustainable Finance (WiSF).
First Half 2025 Market Recap
Sustainable debt issuance totalled US$843bn in 1H 2025, up 6% from 2H 2024 (US$799bn) but down 8% from 1H 2024 (US$915bn) according to Bloomberg. Global sustainable debt issuance volumes were driven once again by Sustainable Bonds which continue to dominate the market, accounting for 75% of sustainable debt issuance. Demonstrating remarkable resilience, the Australian market has defied global trends and recorded a 22% increase compared to 1H 2024. This has been the fastest start to the year on record with issuance totalling US$32.4bn. Surprisingly, this has been driven by a 122% increase in Sustainable Loan issuance despite global Sustainable Loan issuance falling by 21%.
Sustainable Bonds
- In the six months to June 2025, Sustainable Bond issuance reached US$636bn, accounting for 75% of all sustainable debt issuance in 2025.
- Green Bonds continue to be the instrument of choice for issuers globally reaching US$378bn and accounting for 60% of Sustainable Bond issuance this year, and 45% of all sustainable debt issuance in 2025. This is up from 59% and 42% respectively in 1H 2024.
- Sustainability Bonds (which combine Green and Social Use-of-Proceeds elements in the same instrument) had its fastest start to the year ever with issuance reaching US$139bn. The International Bank for Reconstruction and Development (IBRD) and the International Development Association accounted for 7 of the 10 largest Sustainable Bond issuances in 1H 2025.
- Domestically, Sustainable Bond issuance has been relatively flat, up 1% from 1H 2024. The semis continued to drive Sustainable Bond issuance accounting for over half of the volume in Q2 with issuances from QTC, SAFA and WATC.
Sustainable Loans
- Sustainable Loan issuance has continued to face headwinds globally, with macroeconomic pressures and regulatory shifts contributing to a notable year-on-year decline. In the first half of 2025, total Sustainable Loan issuance fell to US$206bn, down 21% from US$261bn in 1H 2024.
- The first half of 2025 underscores a distinct divergence in Sustainable Loan performance. Use-of-Proceeds loans, including Green and Sustainability Loans, recorded substantial growth, rising by 17% and 255% respectively. Notably, Green Loans accounted for 48% of total Sustainable Loan issuance in 1H 2025, up from 32% in the same period last year. In contrast, Sustainability-Linked Loans declined sharply by 46.2%, falling from US$169bn to US$91bn.
- In Australia, Green Loans mirrored the global upward trend, with issuance reaching US$9bn in the first half of 2025, an increase of 162% compared to US$3.5bn in 1H 2024. This surge reflects growing domestic demand for financing tied to clearly defined environmental outcomes. Interestingly, Sustainability-Linked Loans in the Australian market defied the global decline, with issuance totalling US$1.9bn in 1H 2025, only slightly down from US$2.2bn in the same period last year. This relative stability suggests continued interest in performance-based structures among Australian borrowers, despite broader market challenges.
Notable Sustainable Finance Transactions in Q2 2025
BW ESS Bramley BESS - Green Loan
BW ESS issued their Green Loan financing the Bramley Battery Energy Storage Systems (BESS) in the United Kingdom. BESS are critical to the energy transition, enabling grid flexibility and supporting the integration of renewables into electricity networks. The Bramley BESS features a three-hour discharge duration and is the first in Europe to deploy Sungrow’s PowerTitan 2.0 technology. It also benefits from a seven-year tolling agreement with Shell Energy Europe, helping to stabilise the UK grid and support decarbonisation goals.
Westpac acted as Joint Sustainability Coordinator.
Auckland Council - Sustainability Linked Bond
Westpac New Zealand was proud to support Auckland Council as Sole Lead Manager and Sustainability Coordinator in issuing New Zealand’s largest Sustainability-Linked Bond. The NZ$250m 3-year wholesale Sustainability-Linked Bond is the first in Australasia to include a nature-based target, with Auckland Council committing to planting 1 million native ngahere (forest) stems by 31 December 2027. In addition to being the largest Sustainability-Linked Bond in New Zealand, this issuance distinguishes itself through its unique approach to missed targets. Rather than increasing the coupon paid to investors if the nature-based target is missed, Auckland Council will make donation payments to organisations who support native ngahere outcomes. The approach ensures that even if the sustainability target is not met, there is still a meaningful benefit delivered to the community and the environment. By directing donations to organisations supporting native ngahere outcomes, the mechanism reinforces impact while also contributing to a cleaner bond pricing structure, a feature that resonated strongly with investors.
Westpac NZ acted as Sole Lead Manager and Sustainability Coordinator.
West Australian Treasury Corporation – Green Bond
Westpac acted as a Joint Lead Manager for Western Australia Treasury Corporation’s (WATC) latest Green Bond issuance, a new A$2bn 4.75% October 2035 Green Benchmark. The transaction positions WATC well ahead of its FY2025 funding requirement, having now raised A$6.2bn against an initial A$5.1bn forecast.
The Green Bond benefits from a recently updated Second Party Opinion from Sustainalytics, with WATC’s sustainable bond program focused on financing energy efficiency and clean transport projects. The program’s forward-looking approach and emphasis on additionality were well received by investors, with forecast expenditure capacity estimated at A$12bn.
The transaction also reflects the continued evolution of WATC’s sustainable finance strategy, with increased offshore interest and ESG-aligned participation compared to its inaugural Green Bond. The deal further affirms WATC’s position as a leading semi-government issuer in the Australian sustainable finance market.
Westpac acted as JLM.
Contact Energy - Green Bond
Contact Energy successfully executed a new A$400m 6.5-year Green Bond. This marks Contact’s second A$ Green Bond, following its inaugural A$400m issuance in November 2023. Contact is one of New Zealand’s largest listed companies, operating as a diversified and integrated energy provider. Its business spans electricity generation and the sale of electricity, gas, broadband, and mobile services. Contact’s green financing efforts are governed by its Green Borrowing Programme, established in 2017 and independently certified by the Climate Bonds Initiative (CBI). The programme is now incorporated into Contact’s Sustainable Finance Framework, which aligns with the ICMA Green Bond Principles.
Westpac acted as JLM.
Mission Australia - Toowoomba Social Housing
Westpac is proud to back Mission Australia in reaching financial close on a major project to deliver 185 new social and affordable homes in Toowoomba, Qld. Supported by the Queensland Government’s goal of building 53,500 new social homes by 2044, this initiative strengthens Mission Australia’s presence in the state and furthers their impact as one of Australia’s largest for-purpose organisations. The project reflects Westpac’s ongoing commitment to increasing housing supply and building more inclusive communities through sustainable finance.
Westpac was a lender.
Sustainable Finance News
ICMA AGM Updates: New Guidance on Sustainable Bonds for Nature and More
At the June 2025 ICMA Annual General Meeting, several updates were released to enhance sustainable finance practices:
- Sustainable Bonds for Nature: A Practitioner’s Guide
Introduces the optional “Nature Bond” label for green bonds funding nature-focused projects. Offers thematic guidance and includes nature-related KPIs and impact reporting indicators.
- Green and Social Bond Principles Updates
Expanded to include “activities” in the definition of Green Projects and reference the Green Enabling Projects Guidance.
- New Tools and Resources
- Example Checklist for Green Enabling Projects Guidance
- FAQs for Sustainability-Linked Loans financing Bonds (SLLBs) and Green Enabling Projects
- New impact metrics for Access to Essential Services in the Harmonised Framework for Impact Reporting for Social Bonds
- Expanded SLB KPIs Registry
- Consolidated Allocation Reporting Guidance
- Guidance Handbook Update
Clarifies that defence-related projects are likely ineligible for GSS Bonds and reaffirms Social Bonds’ role in supporting vulnerable populations.
For full details, refer to the updated Mapping of the Principles.
Social Measurement & Impact Roundtable
At a recent Westpac Institutional Bank roundtable event, some of Australia’s sustainability frontrunners explained how leading organisations are forging ahead with the complex task of evaluating their social impact. Participants at the event, hosted by Kirsty McCartney, Director, Sustainable Finance, and moderated by Jane Calvert, Westpac Group’s Head of Community & Foundations, explained the ways their organisations are approaching social impact, shared insights on the opportunities and the challenges and revealed how they are getting buy-in from internal stakeholders in the process. Thank you again to all of the participants, Siobhan Henderson from Australian Unity, Gabby Sundstrom from Transurban, Matt Donoghue from Department of Treasury and Finance Victoria, Edmund McCombs from Lendlease, Akaash Sachdeva from HESTA, and Simon Robinson from B4Si.
IGCC 2025 State of Net Zero: Key Insights for Australian Investors
The Investor Group on Climate Change (IGCC) has released its 2025 State of Net Zero report, offering a snapshot of how Australian institutional investors, managing over A$4.2t, are progressing on climate action.
This year’s key findings:
- Net Zero Commitments and Strategies - Over 75% of investors have publicly committed to net zero by 2050, with a rise in interim targets and whole-of-portfolio coverage. Nearly all investors now integrate climate risks and opportunities into general investment practices.
- Fossil Fuel Strategies - 9 in 10 investors apply exclusions or negative screening approaches, with fossil fuel policies now more widely referenced.
- Policy Advocacy - 89% of investors engaged in climate finance-related policy advocacy in 2024, calling for reforms supporting financial and economic resilience.
Key Challenge
Investors cite a lack of investable climate opportunities, policy uncertainty, and insufficient government incentives as growing barriers.
Clean Energy Council – Clean Energy Australia 2025
The Clean Energy Australia Report 2025, published by the Clean Energy Council, provides a comprehensive overview of Australia’s clean energy sector performance in 2024. It covers investment trends, generation capacity, and technology uptake across the major generation and storage sectors.
In 2024, Australia recorded its highest-ever clean energy investment, totalling A$12.7bn, including A$9bn for new large-scale generation projects and A$5.9bn specifically for wind - the strongest year since reporting began. Rooftop solar continued to lead the transition, surpassing 4 million installations and adding 3.2GW of new capacity. It now contributes over 12% of Australia’s energy generation.
Despite strong investment, grid-connected capacity additions were more modest: 1.3GW of large-scale solar and 836MW of wind were added. Challenges persist for large-scale projects, including planning delays, cost pressures, and supply chain constraints.
Sustainable Finance Spotlight
ASFI Taxonomy Release
During June 2025, the Australian Sustainable Finance Institute (ASFI) released the Australian Sustainable Finance Taxonomy (Taxonomy). This release builds on earlier initiatives, including the Australian Sustainable Finance Roadmap (2020) and the Australian Sustainable Finance Action Plan 2025–2027. The Taxonomy is a voluntary framework designed to classify economic activities that contribute positively to environmental sustainability objectives.
Version 1 of the Taxonomy establishes a common standard for green and transition finance in Australia. It aims to support the allocation of capital toward activities that enable the country’s Net Zero ambitions. The initial scope covers six priority sectors: Agriculture and Land; Minerals, Mining and Metals; Manufacturing and Industry; Electricity Generation and Supply; Construction and Buildings; and Transport. Future iterations of the taxonomy are expected to expand to additional sectors.
The Taxonomy includes three key components:
- Technical Screening Criteria, which define the requirements for an activity to be considered as making a substantial contribution to climate change mitigation
- Do No Significant Harm provisions, which ensure that activities aligned with climate objectives do not negatively impact other environmental goals
- Minimum Social Safeguards, which require entities to adhere to essential social protections and standards.
Entities can use the Taxonomy to demonstrate alignment of their operations and investments with climate change mitigation. Relevant metrics include the proportion of total net revenue derived from taxonomy-aligned activities and the share of operational expenditure allocated to such activities. These indicators are intended to improve transparency and consistency in sustainability reporting, supporting more informed decision-making in capital markets.
ASFI expects to publish dedicated guidance for using the Australian Sustainable Finance Taxonomy in labelled sustainable bond transactions by early 2026 at the latest.
ASFI is currently running an implementation pilot with major financial institutions to test the Taxonomy’s practical application. The pilot will inform further market guidance and contribute to the ongoing development of the framework. Westpac is proud to be among the participating institutions.
The Sustainable finance team recommends
Women in Sustainable Finance (WiSF), supported by the Clean Energy Finance Corporation, is an industry initiative that promotes and supports the involvement of women in the sustainable finance sector. Through an active network of over 1,500 professionals, WISF hosts events focused on relevant industry topics as well as leadership and networking sessions, which are open to all, regardless of gender. Wherever you are in Australia, WISF offers valuable opportunities to connect and learn. Be sure to check out their official page for the latest updates and upcoming events.
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