New issuance of green, sustainable, sustainability-linked and transition bonds in Europe reached $464bn in 2025, on par with 2024. Last year continued the trend which has seen social and sustainability bonds declining compared to the record setting year of 2021 when governments and EU institutions issued extraordinary amounts of social and sustainability bonds to address the outfall of the Covid pandemic. Green bonds also saw a small decline in new issuance.
However, we should see a resurgence in 2026 with energy infrastructure investments poised to be catalyst for green bond market growth in Europe. Governments and corporates across Europe face mounting pressure from multiple fronts to accelerate investments in energy infrastructure. First, persistent geopolitical tensions (most recently in Venezuela and Iran) underscore Europe’s reliance on energy imports and the urgent need to strengthen domestic energy supply.
Second, the rapid buildout of AI-driven data centres is beginning to push electricity prices higher, signalling that Europe must expand its power generation and distribution capacity to remain competitive in the global digital economy.
See also: Amy O’Brien: ESG challenges are making us sharper and more precise
Third, the recent attack on power lines in Berlin, which left 45,000 people without power and heat during a severe cold spell, highlights the critical importance of reinforcing infrastructure resilience against physical and cyber threats.
According to the recently announced EU Grid Package, investments in the EU’s energy infrastructure alone need to increase by more than 40% by 2029 to support the integration of renewables and increase efficiency and resilience.
Taken together, these factors are expected to drive modest but meaningful growth in 2026, culminating in a record year for annual green bond issuance across Europe.
A good example here is Amprion’s issuance of three green bonds totalling €2.6bn on 7 January. Amprion is one of German’s four transmission system operators. Sovereigns, supranationals and agencies are projected to increase their green bond issuance by approximately 8%, while corporates will follow closely with a 7% rise. In contrast, issuance from financial institutions is anticipated to remain broadly flat compared to 2025 levels.
European battery energy storage market outlook
Europe’s energy system is in crisis. Russia’s war against Ukraine, high dependence on fossil fuel imports, and the rapid integration of renewables have all contributed to increasing costs and to the volatility threatening European competitiveness.
Faced with these challenges, Europe needs to rapidly scale cheap and domestic sources of clean electricity whilst maintaining grid reliability. Europe’s Battery Energy Storage Systems (BESS) market is indeed growing rapidly driven by renewable integration and volatility in power prices. More than 550GWh of utility-scale BESS is expected to be installed in the next 10 years in Europe, requiring more than €55bn in turnkey investments.
See also: Technological advancements shaping the future of battery recycling
As renewable deployment accelerates, driving greater variability, intermittency, and price volatility, Europe’s BESS market should enjoy a 16.5% CAGR from 2026 to 2035. Installed capacity will surge from 2026 to 2035. Installed capacity will surge from less than 60 GWh today to nearly 1,000 GWh by the mid-2030s. Utility-scale projects will lead with 556 GWh added over the next decade. Corporate and industrial behind-the-meter storage will grow steadily too, driven by self-consumption and peak-shaving needs.
Funding new battery technology
Demand for energy storge is driving innovation, with venture capital trends offering a window into future developments in battery technology. Investors are backing startups that focus on improving battery chemistry, manufacturing, and supply chains, aiming to solve issues like energy density, safety, and recycling.
Sustainable bonds are a key source of capital for energy storage projects. The prevalence of bonds reflects the suitability of large, asset-heavy projects for fixed-income financing and the preference of institutional investors for low-risk, stable-return instruments as the sector matures.
In contrast, venture capital and public equity play a smaller yet strategically vital role, targeting higher-risk, early-stage innovation across battery technologies, advanced materials, manufacturing, recycling, and software.
The financing landscape for battery energy storage reflects a clear segmentation between mature infrastructure and emerging innovation. Sustainable bonds dominate due to their alignment with large-scale, low-risk projects, while equity-based channels such as, venture capital, public markets, and M&A, serve as catalysts for technological advancement and value-chain integration.
See also: Views from the stewardship front line: Why there’s reason for optimism
This complementary dynamic ensures that while debt markets underpin stability and scale, risk-tolerant capital continues to drive breakthroughs in battery chemistry, recycling, and digital optimisation. As the sector evolves, maintaining this balance will be critical to accelerating deployment while fostering innovation across the storage ecosystem.
Conclusion
While sustainable finance may have been in a downturn since 2021 overall investment in energy infrastructure and particularly battery technology stands out as a bright spot. Venture capital and more mature debt markets are combining to ensure that Europe’s BESS market grows rapidly over the coming years.