Sustainable Finance Market Update
How did the sustainable finance market move in Q3 2025? Our October wrap covers notable transactions in Australia and New Zealand, the latest market insights, the first Australian Sustainable Finance Taxonomy-aligned Green Bond and more.
Market recap – September 2025 year to date
Figure 1 – Global Sustainable Finance Issuance by Year (2025 data to September). Source: Bloomberg/Westpac
Figure 2 - Australian Sustainable Finance Issuance by Year (2025 data to September). Source: Bloomberg/Westpac
Global sustainable debt issuance totalled USD 1,209bn (Figure 1) for the 9 months to September 2025, marking a 9% decline from pcp (USD 1,331bn), but up 5% on the same period in 2023 (USD 1,151bn), according to Bloomberg. Conversely in Australia, issuance reached USD 42bn (Figure 2) for the same period, the highest year to date on record, eclipsing the yearly totals for 2023 and 2022.
Sustainable Bonds continued to dominate issuance, accounting for 77% (or USD 929bn) of total sustainable debt issuance in 2025 - the highest proportion on record.
- Green Bonds have had their strongest year, with issuance totalling USD 564bn through the first three quarters. The market is on track to surpass the previous annual record of USD 702bn set in 2024.
- Sustainability Bonds have also seen robust support, with USD 213bn issued year-to-date - on track to surpass the 2024 yearly total of USD 255bn.
- In Australia, Sustainable Bond issuance has mirrored the ongoing strength seen in the global market, reaching USD 28bn by the end of Q3, ahead of the previous two years. This has been underpinned by strong issuance of Sustainability Bonds, which contributed USD 12.5bn.
While Sustainable Bond issuance remains resilient, Sustainable Loans have continued to moderate globally. Global issuance totalled USD 280bn for the 9 months to September 2025, down 25% from pcp (USD 374bn) and flat to 2023 (USD 276bn). The Australian market has shown signs of resilience, with Sustainable Loan issuance reaching a record USD 42bn through the September 2025 quarter - up 22% from 2024 and 33% from 2023, despite broader global declines.
- Green Loans globally have remained relatively stable despite headwinds in other loan categories, with year-to-date Q3 issuance at USD 150bn, contributing to a record cumulative volume for the year.
- Sustainability-Linked Loans (SLLs) continue to face significant headwinds. Global SLL issuance fell to USD 106bn in through Q3 2025, the lowest since 2020.
- In Australia, Sustainable Loan activity has been largely concentrated in Green Loans, with USD 12bn issued to date, more than double that of pcp. Meanwhile, the SLL market has mirrored global trends, showing softer activity through 2025.
Notable Sustainable Finance Transactions in Q3 2025
Westpac was proud to support Bluecurrent as a Joint Sustainability Coordinator in securing a NZD 2.5bn Green Loan certified under the Climate Bonds Standard v4.2, building on its continued commitment to and investment in the energy transition through electricity smart metering and the expansion into digital water metering across Australia and New Zealand. Smart metering enables real-time monitoring, improved billing accuracy, and faster fault detection, helping utilities and consumers manage energy and water use more efficiently. The green loan follows their inaugural Climate Bonds Certified financing in 2023 with the loan certified under the Electrical Grids and Storage and Water Infrastructure sector criteria.
Westpac and Westpac New Zealand acted as Joint Sustainability Coordinators.
FRV Australia (Gnarwarre BESS) – Green Loan
FRV Australia has reached financial close on its largest Battery Energy Storage System (BESS) to date - the 250MW/500MWh Gnarwarre BESS in Victoria. Backed by a core lending group and financed under FRV’s portfolio financing, the project is a key enabler of grid stability and supports Australia’s clean energy transition. Australia’s BESS market continues to show strong momentum, with the 12-month quarterly average energy output of fully commissioned storage projects rising 39% in Q2 2025 to a record 584MWh, according to data from the Clean Energy Council. Despite a softer quarter, this marks the ninth consecutive quarter where newly financially committed storage projects have exceeded 1,000MWh in energy output. Once completed, the latest project will bring FRV’s total installed capacity to approximately 1.4GW.
Westpac acted as a Green Loan Coordinator.
Endeavour Energy – Sustainability-Linked Loan
Endeavour Energy secured AUD 2.065bn in financing under refreshed SLLs, reinforcing its strategic ambition to decarbonising the grid by 2035. The SLLs are tied to updated KPIs including a new Scope 3 emissions target and a nature-related KPI focused on net habitat gain, alongside waste and Scope 1 & 2 emissions KPIs. Endeavour Energy’s total sustainability-linked financing has surpassed AUD 3bn, which represents ~40% of their total debt. The refreshed financing builds on the inaugural SLL completed by Endeavour in 2022, when it became the first distribution network service provider in Australia to issue sustainability-linked financing.
Westpac was a lender.
ColCap Financial Group – Social Loan
In a milestone for social financing in Australia, ColCap Financial Group recently issued its first social Residential Mortgage-Backed Security (RMBS) tranche.
Supported by Specialist Disability Accommodation under the National Disability Insurance Scheme, the AUD 330m social tranche forms part of a broader AUD 1.2bn RMBS issuance. The social tranche is dedicated for purpose-built housing designed to meet the living and accessibility needs of people living with disabilities.
Westpac acted as Joint Lead Manager.
Eligible green and social projects in South Australia look set to benefit from the proceeds of a new AUD 1.5bn sustainability bond.
Westpac was proud to act as a Joint Lead Manager for the South Australian Government Financing Authority’s (SAFA) latest green finance instrument, which carries a coupon rate of 4.75% and a maturity date of May 2035.
Eligible green and social projects across the state include education, housing, health and water. The issuance reinforces SAFA’s leadership in the Australian sustainable finance market, where it claims to be the largest issuer of sustainability-labelled bonds.
Westpac acted as Joint Lead Manager.
Transpower has reinforced its commitment to a net-zero carbon transmission grid for New Zealand by successfully closing its dual green bond offering. Comprising an NZD 100m 5-year retail fixed rate bond and an NZD 125m 3-year wholesale floating rate bond, Westpac New Zealand was proud to act as the sole lead manager.
The dual tranche structure allowed Transpower to fund the gaps in its debt maturity profile and provide diversity of investment for both retail and wholesale investors. Transpower established its Green Financing Framework in 2022, which is programmatically certified by the Climate Bonds Initiative. There are currently 14 green bond issuances outstanding under the Framework.
Westpac New Zealand was the sole Lead Manager.
Across the Sector
Climate Bonds Initiative – Melbourne Event
Westpac was proud to host Sean Kidney, CEO of the Climate Bonds Initiative (CBI), at our Melbourne offices for an engaging and timely discussion with clients and investors. Sean shared valuable insights into the evolving global ESG and sustainable finance landscape, touching on key themes such as climate resilience, taxonomy developments, and the rise of labelled sovereign issuance. We thank Sean and the CBI team for continuing this annual tradition and our guests joining.
Sustainable loan report reveals strong local performance
The sustainable finance market is continuing to maintain healthy activity levels with the latest edition of Environmental Finance’s Sustainable Loans Insight revealing ongoing strength within the use of proceeds sector (green bonds and loans) while noticeable moderation in Sustainability-Linked instruments across the first half of 2025.
Published by Environmental Finance which captures loan data submitted to its platform, the 2025 report published in September highlights that renewable energy continued to lead the way for use-of-proceeds lending during FY2025, capturing more than half the value raised by these loans. Green buildings came in second, reflecting the real estate industry’s shift toward sustainable design.
SLL key performance indicators continued to be primarily focused on greenhouse gas emissions reductions, which was the most popular KPI by value and volume in FY2025. Gender equality KPIs are also becoming more common and were the most popular social KPI during the period.
Closer to home, the Asia-Pacific region recorded a stronger focus on renewable energy and green buildings, while Westpac ranked second in the Sustainability Coordinator league table for Oceania. And how is the Australian market tracking? The report shows the Australian dollar is the third most popular currency for sustainable loans (behind the US dollar and the Euro), which indicates a strong local market for the issuance of labelled debt.
Certification scheme introduces resilience
As the world continues to feel the impact of climate change, building resilience has become essential. This is reflected in the latest update to the Climate Bonds Standard and Certification Scheme (Climate Bonds V4.3), which includes a ‘Resilience Criteria’ for evaluating how well a project, asset or activity is designed to withstand, adapt to and thrive in the face of future climate impacts.
Developed in conjunction with the Climate Bonds Resilience Taxonomy and its related methodology, the criteria are particularly relevant for sectors where climate resilience is as critical as emissions reductions – these include infrastructure, water, agriculture, and the built environment.
Inclusion of resilience in the Climate Bonds Standard empowers market participants to support projects that not only cut emissions but also withstand and adapt to climate impacts. By enabling certification of projects that incorporate high-quality adaptation and resilience planning, the pipeline of investible climate solutions may expand at a time when they’re needed most.
ECB announces climate factor measure
In a bid to improve the management of climate-related financial risk, the European Central Bank (ECB) has announced significant reforms to its collateral framework. A new ‘climate factor’ measure, to be implemented in the second half of 2026, could reduce the value assigned to eligible assets used as collateral and could limit how much the Euro system is willing to lend against them.
Under the reform, the ECB will assign an uncertainty score to marketable assets from non-financial corporates used as collateral. This score will be derived from three components: sector-wide climate stress risks, issuer-specific climate performance, such as greenhouse gas emissions and disclosure quality, and asset-level vulnerability to future climate shocks.
The ECB’s new climate factor measure brings greater financial visibility to climate risk and sets a strong precedent that other central banks may be closely watching. For bond issuers and borrowers, the reform could mean higher costs or reduced access to funding if their assets are carbon intensive. For green financiers, it may boost demand for climate-aligned investments and validates ESG as a core financial metric.
Sustainable Finance Spotlight
Victorian Power Networks (VPN) has issued its inaugural green bond, marking the first Australian green bond to be aligned with the Australian Sustainable Finance Taxonomy, as well as being the first EU taxonomy aligned issuance for an Australian entity. Westpac acted as Joint Lead Manager and Green Structuring Adviser on the transaction and development of VPN’s Sustainable Financing Framework.
The AUD 750m dual-tranche transaction was issued in 6.5-year fixed and floating rate formats, attracting strong demand from fixed income investors with an orderbook exceeding AUD 2.45bn.
VPN’s decision to align the bond with the Australian Taxonomy was described by Alastair Graham, Head of Treasury, as a “natural addition” to their Green Bond Framework. He noted that the initial decision to offer a green bond was driven in part by investor demand for labelled securities from the electricity distribution sector and was backed by the deal group supporting the step to include Taxonomy alignment. As a result, VPN received significant and very positive feedback from investors.
Graham added that VPN felt confident in offering a green bond to the market, given the ongoing electrification focus of Victoria and the State Government’s ban on gas-connections in new homes and other measures to expediate the uptake of renewables and the commitment to reach net zero emissions by 2045.
Our own Sustainable Finance Director, Kirsty McCartney, commented that the value of taxonomy alignment centres around building trust with stakeholders, particularly investors, by demonstrating environmental integrity and credibility, which in turn supports risk mitigation, and can demonstrate market leadership. “Some investors have started asking about taxonomy alignment and it came up in pre-deal meetings…. [and that] anecdotally, some investors reported having larger bids for a highly credible green-bond product.”
This transaction represents a key step in financing Australia’s energy transition, with proceeds directed toward grid decarbonisation and renewable energy integration.
Sustainalytics provided the Second Party Opinion confirming alignment to the Green Bond Principles, while ISS-Corporate provided an external review confirming alignment with the technical screening criteria of the Australian Sustainable Finance Taxonomy.
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