The London Stock Exchange's Sustainable Bond Market is set to celebrate its 10th anniversary in June. Kelly Gregory and Baylie Thompson review recent highlights and innovations, and look forward to its next milestones
Environmental Finance: Issuers raised $56 billion through the London Stock Exchange's Sustainable Bond Market (SBM) last year. What would you point to as some of the highlights of that activity?
Kelly Gregory: In 2024, we had issuances from a range of issuers, including sovereigns, supranationals and agencies (SSAs), financials and corporates. There are a couple of transactions I would highlight. One would be the £350 million ($453 million) social bond from UK publisher Pearson Plc, the proceeds of which were directed to education products that target underserved learners and communities, such as people living below the poverty line, with disabilities or the unemployed. We also admitted to trading the $100 million transaction by logistics firm DP World, which was the first blue bond issuance from the Middle East and North Africa region. It will fund sustainable projects across marine transportation, port infrastructure and ecosystem conservation.
Another highlight was our work alongside the International Capital Market Association (ICMA) and the Islamic Development Bank in publishing guidance for issuing green, social and sustainability sukuk. The guidance explains the type of projects that are likely to be eligible and the steps that issuers need to take to issue these ESG sukuk instruments. Alongside that, there has been substantial sukuk issuance on the London Stock Exchange, such as Saudi Investment Bank's debut Tier 1 Sustainable Sukuk Issuance of $750 million. In addition, we've had sustainable sukuk from Saudi Electricity Company, Kuwait's Warba Bank and Saudi-based Al Rajhi Bank, among others.
EF: How is issuance shaping up in 2025? What are your expectations for the coming year?
KG: We've had a strong start to 2025, with nearly $12 billion raised in January. For example, the Council of Europe Development Bank opened the market to launch its social bond, the first sterling SSA social bond we've listed on the London Stock Exchange. We've also seen sustainable debt issuance from other SSAs, including the European Bank for Reconstruction & Development, the International Fund for Agricultural Development and the Asian Infrastructure Investment Bank. We're very strong in the SSA space: as of 2025, nearly 30% of issuers on the SBM are SSAs. We also had an issuance in January from Hungary as a sovereign issuer.
This year, we're expecting to see a number of sustainable bonds on the SBM mature – this is a trend seen in the wider global market, as well. It will be interesting to see how many of these issuers choose to roll over that debt with new issuance, reaffirming their commitments to sustainability. We have already seen 70% of issuers with bonds maturing this year on the SBM issue further sustainable debt.
EF: Brazil issued its first sovereign sustainability bond on the London Stock Exchange in June. What role is Brazil likely to play in sustainable investment in the run-up to the COP30 climate talks?
Baylie Thompson: Brazil's seven-year, $2 billion sustainability bond issued in June 2024 was more than two times oversubscribed, with offers from more than 220 international investors. Since then, Brazil has moved its debut sustainability bond, issued in November 2023, to London as well.
Following that, in November the governments of the United Kingdom and Brazil announced in a joint statement that Brazil will make London the primary home for all its future global debt issuance, so we'd expect to see more of Brazil's sustainability bonds listed in London over the next few years.
This year, as host of COP30 in November, Brazil has a key role to play in amplifying the voices of developing countries and advocating for greater climate finance to support their clean energy objectives. Towards the end of last year, Brazil was one of the first countries to announce an updated Nationally Determined Contribution (NDC), which entailed an ambitious climate pledge to reduce emissions by as much as two-thirds by 2035 (compared with 2005 levels); meeting these targets will require substantial volumes of capital to be mobilised towards the energy transition.
Building on from its role as G20 President, we expect Brazil will continue to be at the forefront of international cooperation on sustainable finance. For example, last November Brazil and other countries joined the UK in launching the Global Clean Power Alliance to help meet the commitment, made at COP28, to treble renewable energy worldwide. This will depend upon unlocking private sector finance for renewable energy projects in developing countries.
Many are suggesting that COP30 is to be the 'Nature COP', given that it is being hosted in the Brazilian Amazon. There is a unique opportunity to bring global attention to the challenges faced by the region, while also highlighting the role of nature and nature-based solutions in climate change mitigation and adaption.
EF: The Climate Investment Funds (CIF) has announced it is listing its bond issuance programme on the London Stock Exchange. How will that work?
KG: This is the first time that a multilateral climate fund will raise private investment directly from the international capital markets. The inaugural $500 million bond from the CIF Capital Markets Mechanism (CCMM) was six times oversubscribed and had an order book totalling over $3 billion; it was great to see this come to the London Stock Exchange.
By issuing fixed income securities, CCMM enables the frontloading of reflows from CIF's long-term loan portfolio and other investments. This allows new climate finance to be swiftly unlocked at scale without having to wait for those long-term reflows in the future, given that CIF's existing loans have a tenor of up to 40 years. The funds raised through the CCMM will enable clean energy infrastructure in developing countries, including renewable energy generation, deep industrial decarbonisation and the development of clean technology supply chains.
EF: Last year, the London Stock Exchange published updated sustainability reporting guidance, Your Guide to Sustainability Reporting, for issuers. What are the headlines from that guidance?
BT: We first published ESG reporting guidance back in 2016, and we've produced a number of iterations since then in line with market developments. Towards the end of last year, we published updated sustainability reporting guidance to reflect the evolution of the reporting landscape.
Where resources often focus on compliance with a specific framework, we've focused the guidance on how the reporting process can add value to companies by providing strategically useful insights and improving investor engagement.
Given that many of our issuers are large multinationals and may be within scope of many jurisdictional requirements, the guidance explains the approach to regulation taken by different jurisdictions. It also describes how investors typically receive, process and act on corporate sustainability data. If companies can understand why their investors want information on certain material sustainability issues, what information these investors want, and how they are then using this information, they will be able to enhance their engagement with those investors.
The primary audience for this guidance are companies listed on our equity markets. But it is also relevant to corporate bond issuers with debt listed on our debt capital markets, as they also may be expected to communicate their sustainability strategy with stakeholders. For example, many investors are seeking to understand how a labelled bond connects with the issuer's overall sustainability strategy.
EF: On a related note, London Stock Exchange Group (LSEG) has called for a global commitment to adopt the recommendations of the International Sustainability Standards Board (ISSB). What is your thinking there, and how much progress have you seen?
BT: The landscape of sustainability reporting has shifted over recent years. While disclosures used to be largely voluntary, the landscape is now increasingly defined by regulatory reporting requirements. We have many international companies admitted to trading on our markets, which operate in multiple jurisdictions and may have to report multiple times to comply with each jurisdiction's requirements. Greater consistency in disclosure requirements could significantly reduce the complexity involved for our issuers in reporting on sustainability performance and strategy.
The ISSB was established with the aim of addressing this fragmented landscape. The ISSB's standards – S1 and S2 – have established a global baseline of sustainability information for capital markets. These standards are bringing the disciplines of sustainability reporting closer to that of financial reporting.
Last year, LSEG worked with the Principles for Responsible Investment and the UN Sustainable Stock Exchanges Initiative to deliver a call to action in favour of adoption of the ISSB standards by the end of 2025. That call to action was signed by 120 organisations across the global financial ecosystem.
As of September 2024, there are 35 jurisdictions, covering over 40% of global market capitalisation, progressing towards introducing ISSB standards into their regulatory frameworks.
EF: The London Stock Exchange's SBM is celebrating its 10th anniversary in June. What role would you say the London Stock Exchange has played in the sustainable debt markets, and what does that decade tell us about the evolution of sustainable finance?
KG: We were the first major exchange to establish a green segment back in 2015 and we have since developed a broad sustainable debt offering through the SBM. The 10-year anniversary will allow us to celebrate the role the London Stock Exchange, our issuers on the SBM, and the wider ecosystem have played in the sustainable debt markets. As we see it, the SBM has helped investors to increase visibility of, and access to, direct debt securities from issuers who are meeting internationally recognised standards, such as ICMA.
In 2021, we added a transition segment, working closely with market participants in response to the needs of issuers and the evolution of the market. This is something we will continue to do, monitoring the market to see how the SBM should adapt and grow, to continue to meet the needs of our issuers.
BT: Transition bond volumes have been low over recent years, both on our markets and globally, but transition finance remains critical if nations are to even get close to the goals set out within the Paris Agreement. The London Stock Exchange recently joined the UK Transition Finance Council, an initiative co-launched by the City of London and the UK government, which is focused on leveraging the UK's existing strengths in financial services to become a leading hub for raising transition capital.
We anticipate that this work, alongside other international efforts to create more common definitions of transition finance and consistent disclosures around transition plans, will contribute to the growth in global issuance of transition finance instruments in future years, whether that be through transition bonds or sustainability-linked bonds.
Kelly Gregory is a product manager, and Baylie Thompson is a senior associate, at the London Stock Exchange. They are both members of the Advisory Council to the Sustainable Bond Principles, 2025-26
To learn more about its Sustainable Bond Market, see www.londonstockexchange.com/raise-finance/debt/ourproducts/sustainable-bond-market
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