Sustainable Finance Market Update Q4 2025

As 2025 has come to a close, our Q4 Sustainable Finance market update reviews the year's performance, looks at what’s ahead for 2026 and highlights developments in nature and finance. You’ll also find news on the latest market deals and details about an upcoming event you won't want to miss.

Market recap – 2025

Figure 1 – Global Sustainable Finance Issuance by Year. Source: Bloomberg/Westpac

Figure 2 – Australian Sustainable Finance Issuance by Year. Source: Bloomberg/Westpac

Global sustainable debt issuance reached USD 1,578bn in 2025 (Figure 1), representing an 8% decrease from 2024, according to Bloomberg. Peaking at USD 1,916bn in 2021, global volumes have since stabilised near USD 1,600bn. Q4 2025 continued the slight downward trend, with quarterly issuance falling below USD 300bn for the first time since Q3 2020, influenced by ongoing negative ESG sentiment in North America and regulatory changes in Europe.

Despite subdued global activity, Australia recorded a new high in 2025 with USD 53.8bn (Figure 2) in issuance, an 11% increase on 2024. Q4 2025 issuance remained steady at USD 10.1bn, predominantly driven by green loans and bonds.

Bonds remained the preferred instrument for global issuers, accounting for 73% of all sustainable debt, compared to 59% in Australia. This reflects the relative strength of Australia’s sustainable loan market amid ongoing softness globally.
Globally, total Sustainable Bond issuance was stable year-on-year (-2%) at USD 1,160bn. In Australia, USD 32bn was issued in Sustainable Bonds, unchanged from the previous year, comprising 2.8% of global issuance, consistent with prior years.
Sustainability Bonds overtook Green Bonds as the leading labelled bond category in Australia, supported by significant issuances from the South Australia Financing Authority (AUD 3.5bn across two issuances) and NSW Treasury Corporation (AUD 1.5bn). Globally, Green Bonds delivered a record USD 724bn in 2025.

While there was a correlation between the Australian and global labelled bond markets, the Sustainable Loan market showed a different pattern.

Global sustainable loan issuance declined 21% year-on-year to USD 419bn, whereas Australian issuance increased 22% to USD 22bn.

Green Loans comprised 60% of global sustainable loan volumes and 78% of Australian issuance, reflecting ongoing demand driven by the energy transition and increased activity in data centres. Consequently, Australia’s share of global sustainable loan volumes now exceeds 5%.
Sustainability-Linked Loans remained subdued, with global volumes down 53% year-on-year and Australian volumes down 30%. This change in volume could be attributed to several factors, including increased anti-ESG sentiment as well as heightened reporting and regulatory obligations. However, as Kiril Lebedyanskiy remarked at the LMA Sustainable Finance Conference, “their decline in volume is not necessarily a negative signal. Rather, it reflects a maturing market where quality trumps quantity.” The SLL market is one to watch in 2026.

Looking ahead - 2026

The Australian sustainable finance landscape is set for another strong year in 2026, with several trends shaping market activity. Our team has identified three key themes expected to influence issuers, investors and the market in the year ahead.

1. Transition Finance gains momentum

Transition Finance is expected to take on a more prominent role in 2026 as new principles and frameworks help define credible transition labelled activity. Recent developments in Transition financing, together with guidance such as the ICMA Climate Transition Bond Guidelines, offers greater standardisation for assessing projects and assets that support the shift to a lower carbon economy. These developments are particularly relevant for high emitting sectors like steel, cement, and chemicals, by broadening access to capital and providing investors with more transparent tools to evaluating transition pathways and projects.

2. Strong investment pipeline in Australia’s renewable energy and net zero infrastructure

Financing demand for Australia’s energy transition is expected to remain strong. Continued development of renewable energy assets and net zero aligned infrastructure will likely underpin strong Sustainable Loan volumes throughout 2026. Federal policy initiatives, including the Capacity Investment Scheme and increased funding for the Clean Energy Finance Corporation are designed to provide long-term investment certainty and accelerate the rollout of clean energy and associated infrastructure.

In parallel, the continuing expansion of data centres, which require significant capital, is expected to further contribute to labelled issuance activity, with many financings structured in sustainable formats subject to energy efficiency and water use criteria.

3. Australian Sustainable Finance Taxonomy

The release of the Australian Sustainable Finance Taxonomy in June 2025 is hoped to play an increasing role in supporting the flow of financing towards activities creating a more sustainable and resilient Australia. It’s anticipated that more issuers will report alignment with the Taxonomy, whether through full adoption or by using its Technical Screening Criteria to inform project selection. The Taxonomy’s integration of transition related criteria reinforces the broader shift towards credible, science aligned transition financing. This momentum should build following Victoria Power Networks’ inaugural issuance aligned with the Taxonomy’s screening criteria.

Notable Sustainable Finance Transactions in Q4 2025

Victoria Power Networks Green Bond

Victorian Power Networks successfully issued its inaugural green bond in October, marking a significant milestone as the first Australian green bond aligned with the Australian Sustainable Finance Taxonomy and the first EU taxonomy-aligned issuance by an Australian entity. Westpac was proud to act as Joint Lead Manager and Green Structuring Adviser, supporting the transaction and the development of VPN’s Sustainable Financing Framework.

The dual-tranche 6.5-year transaction attracted strong investor demand with an orderbook exceeding AUD 2.45bn. Proceeds will fund grid decarbonisation and renewable integration, supporting Victoria’s energy transition and net zero target by 2045.

Westpac acted as Green Structuring Adviser and Joint Lead Manager.

Eureka Group – Social Loan

In November, Eureka Group converted AUD 180m of loan facilities into Social Loans, with proceeds dedicated to delivering affordable housing and green upgrades across its communities. Eureka owns or manages rental communities nationwide, providing secure, long-term accommodation to over 3,200 residents - making it one of Australia’s largest providers of affordable seniors’ rental accommodation. Westpac supported Eureka with the development of a Sustainable Finance Framework, under which eligible projects include affordable housing delivery and sustainability initiatives such as rooftop solar PV, battery storage and energy efficiency upgrades designed to reduce residents’ energy costs and emissions.

Westpac acted as the sole Sustainability Coordinator.

IFM Real Estate – Core Fund Sustainability-Linked Loan

Sustainable real estate in Australia continues to lead globally, with Oceania ranked first in the 2025 GRESB benchmark. Reflecting this leadership, IFM Real Estate refreshed its Core Fund Sustainability-Linked Loans, updating performance targets across A$4.675bn of facilities - one of the largest SLL programs in Australian real estate. The new KPIs include emissions intensity (featuring one of Australia’s first embodied carbon targets), waste reduction, water consumption and labour certification. This refresh aligns financing with IFM Real Estate’s updated sustainability strategy and reinforces its commitment to embedding sustainability across property development and management.

Westpac acted as a Joint Sustainability Coordinator.

ColCap RMBS

In December 2025, ColCap priced its final RMBS transaction for the year, totalling AUD 1.2bn across multiple tranches. This issuance marks the first time in the Australian RMBS market that green and social tranches have been included within a single transaction. The green tranche supports financing for energy-efficient residential buildings, while the social tranche includes loans secured by Specialist Disability Accommodation under the National Disability Insurance Scheme, promoting housing accessibility for people living with a disability. This deal caps ColCap’s 2025 funding program and follows its July issuance, which was the first to securitise NDIS housing loans in Australia.

Westpac acted as Joint Lead Manager.

Sustainable Finance Spotlight

Putting a price on nature

Biodiversity loss and associated risks have increased in focus since December 2022, when almost 200 countries signed the ground-breaking Kunming-Montréal Global Biodiversity Framework (GBF) at COP 15.

Efforts to embed nature into financing instruments are also gaining momentum, with new local and international developments underway. In Australia, for example, the Department of Climate Change, Energy, the Environment and Water recently commissioned a report to explore how the country’s sustainable finance taxonomy could expand to include nature-related objectives for agriculture, forestry and land management.

Released by the Australian Sustainable Finance Institute (ASFI), the ‘Integrating Nature into Finance’ report includes objectives critical to mitigating climate change and protecting nature ecosystems: biodiversity and ecosystem protection, sustainable water use and pollution prevention and control.

It proposes draft technical screening criteria that align with the GBF, aiming to ensure that financed activities make a substantial contribution to one of these environmental objectives. It also examines how the “Do No Significant Harm” and “Minimum Social Safeguards” principles already embedded in the taxonomy can be applied to nature-related investments, with the vision to eventually capture a broader set of sectoral activities that support climate adaptation, mitigation and resilience.

Recognition of the valuable role of nature and biodiversity is also mirrored in developments in Japan, where the City of Nagoya recently issued what may be the world’s first ICMA-aligned nature bond. A landmark example of how labelled finance can be used to support biodiversity outcomes, the bond funds a mix of green and nature-related projects, including the redevelopment of Higashiyama Zoo and Botanical Gardens – home to the 1000-tree Cherry Blossom Tunnel – and is designed to protect rare species and restore ecosystems.

Closer to home, Auckland Council launched its first Sustainability-Linked Bond in July 2025 with a KPI tied to the planting of one million native ngahere (forest) stems by 2027. These approaches demonstrate how cities can lead in integrating nature into public finance.

Supporting these efforts, ICMA’s Sustainable Bonds for Nature: A Practitioner’s Guide provides voluntary guidance for structuring credible nature-themed bonds. It introduces an optional “Nature Bond” designation and outlines how issuers can align with GBF targets, report on nature-related KPIs and manage environmental and social risks.

Together, these developments signal a growing shift towards integrating nature into finance and show that companies, investors and policymakers have a vital role to play in preserving the natural world.

The Sustainable finance team recommends

Scaling up metals for the low-carbon future

Demand for copper and aluminium – two vital ingredients for decarbonisation and electricity grids – looks set to soar in the next decade as the energy transition gathers pace. But what are Australia’s prospects for export growth?

A recent Westpac IQ article explores the country’s strategic position in the global supply chain, as well as the challenges ahead. What are the policy shifts and investment trends? How can coordinated action unlock opportunities in sustainable mining and processing?

Read the full article here and be sure to subscribe to Westpac IQ for the latest economics, market analysis and thought leadership content straight to your inbox.

Finally – don’t forget

KangaNews Debt Capital Market Summit 2026

KangaNews has confirmed that its flagship Debt Capital Market Summit will return to Sydney on 25 - 26 March 2026, with an expansion to its traditional format. For the first time, the event will run across two full days and will integrate the sustainable debt sector into a wide-ranging and curated agenda. The Summit remains the premier event for Australia’s fixed income community, attracting issuers, investors, intermediaries and policy specialists from across the region to discuss the themes shaping debt capital markets in 2026. Make sure to secure your registration now by clicking here.

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