Market Overview: A Stable Start to 2025

Alexander Dakin Data Analyst, Bloomberg

The ESG syndicated loan market began 2025 with €73.0 billion in global issuance during Q1, reflecting a 31% decrease from the same period in 2024.

Deal count declined by 36% year-over-year, suggesting a more measured pace of activity amid evolving market conditions. Refinancing volumes showed greater stability, easing by 25%, which indicates that returning borrowers continued to engage with the market despite broader headwinds.

Green Loans and Sustainability-Linked Loans (SLLs) continued to lead ESG lending, contributing €41.7 billion and €27.7 billion respectively. Green Loans, in particular, gained further traction, now accounting for 40% of total issuance, up from 32% a year earlier. This growth reflects increasing issuer interest in project-specific structures and use of proceeds frameworks. While overall issuance levels have moderated, appetite remains strongest for instruments underpinned by transparency and clear ESG alignment. Taken together, the data points to a market that is adjusting thoughtfully, with borrowers and lenders responding to a more selective and dynamic environment.

Source: Bloomberg

Currency and Sector Developments

For the first time in several quarters, EUR denominated issuance surpassed USD in Q1. This shift may reflect broader macro trends, including FX volatility and relative market stability in the eurozone, but it also points to the influence of regulatory frameworks pushing European borrowers toward standardised disclosures and sustainable structuring.

On the sector front, utilities remained the largest contributor to ESG lending, generating €17.6 billion in volume. The standout, however, was communications, which surged from €4.8 billion in Q1 2024 to €15.1 billion this year, signalling increasing uptake of ESG linked finance in previously underrepresented industries.

Source: Bloomberg

Source: Bloomberg

Regional Dynamics

EMEA continues to lead the global ESG lending market, especially through SLLs, bolstered by ongoing regulatory support through CSRD, ESRS, and national sustainability agendas.

North America saw moderate issuance, led primarily by Green Loans. Political uncertainty, evolving state-level regulations, and pending federal ESG guidelines continue to shape borrower sentiment. Meanwhile, APAC held steady, with increased activity in Sustainability and Social loans. Transition-focused lending and greater adoption of SLLs also contributed to regional momentum.

Source: Bloomberg

Outlook: ESG Lending Adjusts Amid Uncertainty

While Q2 data continues to take shape, it is still too early to draw definitive conclusions about the market’s direction. Initial observations suggest that activity may be stabilising, supported in part by delayed transactions and ongoing refinancing flows. EMEA and parts of APAC appear to show relatively strong pipelines, while North America continues to display a more measured pace with a boom in Green Loans.

Policy developments will play a critical role in shaping the remainder of the year. In Europe, delays to the CSRD rollout and the introduction of the Omnibus simplification package are prompting questions about disclosure timelines and market readiness. In the U.S., the regulatory direction of the government continues to influence both borrower sentiment and investor appetite for ESG labelled debt.

While Q1 did not bring headline growth, it underscored a market in transition. The rising share of Green Loans, growing regional divergence, and a shift toward more tangible ESG structures suggest a maturing ecosystem. As global conditions evolve, sustainable lending is likely to remain shaped by selectivity, transparency, and structure, with a gradual return to growth dependent on policy clarity and market confidence.

The release of updated Sustainability-Linked Loan Principles (SLLP) by the LMA in March 2025 adds further clarity to current market practice. The revised guidance includes more explicit language around KPI calibration and external verification, providing a more structured reference point for borrowers and lenders. While many of the changes align with existing norms, they will inform how market participants approach refinancing and the development of new transactions in the months ahead.