Last year was a challenging one for sustainable debt issuers in emerging markets. But a strong start to 2026 and innovation across nature, taxonomies and transition present promise, say Beth Burks and Rafael Janequine at S&P Global Ratings
Environmental Finance: What patterns of sustainable bond issuance did you see in emerging markets in 2025, and how do you expect them to evolve in 2026?
Rafael Janequine: Everyone knows the past year was challenging for the sustainable bond market in general, and emerging markets were no exception. Nominal volumes for public bond offerings were down 30% in emerging markets, compared with a drop of 23% in developed markets. This was driven by geopolitical and trade uncertainties, which particularly affected emerging markets.
Windows for issuers to access the capital markets were narrower than usual, requiring some agility from investment bankers. And, whenever you need agility, issuers and bankers tend to go for plain vanilla rather than labelled debt.
One region that was an exception was the Middle East, where volumes actually increased, by 3%, in 2025: Saudi Arabia made a big contribution to that, on the back of significant investment-grade activity and good access to the capital markets.
For the past four years, emerging markets have represented 16-18% of global sustainable bond issuance. In 2025, this share dropped to 14%. Our forecast for 2026 will be around 10-15%, given that overall market uncertainty is likely to persist.
Globally, issuance in 2026 will be sufficient to keep the stock of outstanding sustainable bonds steady. However, the picture for emerging markets is a bit more challenging: 31% of bonds will mature in 2026, compared with only 14% in developed markets. If issuers choose to refinance without a label, the pool of sustainable debt that investors are able to access will become less geographically diverse.
However, on a positive note, 2026 has started strongly. Already in January, we’ve seen the largest sustainable-labelled issuance from Mexico, at almost €5 billion ($5.8 billion), as well as bonds from Chile, Saudi Arabia, the Philippines and Hong Kong. Despite the overall decline in 2025, this demonstrates the commitment from these issuers to the sustainable bond market.
We also produced more than 100 second-party opinions (SPOs) from emerging market issuers over the last two years. Not every SPO leads directly to issuance, but it does mean that entities are preparing to issue in the future.
EF: What types of emerging market sustainable bonds are proving popular, and why?
RJ: Green, sustainable and sustainability-linked structures have been the most popular instruments in emerging markets. The latter tend to particularly play a role in private transactions, especially in Latin America and Africa – sustainability-linked loans have been used for transition finance, and by banks to better engage with clients. The use of the sustainable label is also more common in emerging markets, because it allows issuers to direct finance to social purposes as well as green ones – it gives them more flexibility in identifying eligible projects, helping them reach minimum ticket sizes.
There was also momentum around nature finance last year, related to COP30 in Brazil. There were a number of voluntary guidelines published on the theme, such as the nature bonds guide from the International Capital Market Association (ICMA), the World Bank’s Amazonia bonds guidelines, and the International Finance Corporation’s second version of its blue finance guidelines.
That helped trigger a number of SPOs and transactions. We produced an SPO for Banco Davivienda’s biodiversity bond, and for pulp producer Suzano’s biodiversity-focused sustainability-linked financing framework: it secured $1.2 billion in syndicated loans with that SPO.
An interesting developing trend is sovereigns playing a role in nature finance. For example, Cote d’Ivoire published a framework last year with a KPI linked to forest-cover losses, which involved some stringent deforestation controls. And, at the start of 2026, Chile issued a $1.5 billion 10-year bond with a KPI for the protection for forests: it’s in line with Chile’s 30% land conservation commitment under the Kunming-Montreal Global Biodiversity Framework, which provides an analogy with the Paris Agreement.
EF: To what extent will sustainable debt issuance from emerging markets be able to address shortfalls in climate financing?
Beth Burks: It’s part of the story because there’s a large gap to fill to help emerging markets deliver on global transition goals. But there are a lot of structural constraints to scaling climate finance, related to debt, that are specific to emerging markets. Many emerging market sovereigns are already highly indebted, so adding to the debt burden is not always an option, particularly in frontier markets. There are also still issues around project preparation and pipeline, to make sure that there are projects that are bankable and well-structured.
However, green and social bonds do foster a lot of transparency in how money is being allocated, and it gives investors assurance on actual impact. They attract specialised investors, including multilateral financial institutions, thematic funds, etc., so they can serve as a catalyst for driving climate action.
There are also certain programmes around blended finance that have sustainability requirements where these instruments can be quite useful, especially when they’re paired with credit enhancement mechanisms.
EF: What about adaptation? To what extent are emerging market issuers able to issue bonds to raise finance for adaptation?
BB: Almost all of the sovereign issuances that we’ve looked at address adaptation to some extent – but this is less the case in the private sector. Adaptation is often hard to segment and draw out as specific projects. Instead, it’s usually a part of making the whole asset resilient. You therefore tend to see adaptation measures within the overall project or asset, while emerging market sovereigns are also frequently issuing social bonds.
RJ: I agree. But looking forward, we do see a trend towards investing in adaptation measures, given that we are not driving the transition fast enough. So, there is a consensus that adaptation will play a more and more important role each year.
In the private sector, we are starting to see multilaterals work with companies to build more specific adaptation frameworks. There are already some public examples, such as the work that the International Finance Corporation did with ENGIE Energía Perú to help to structure a KPI specifically for adaptation.
EF: The publication of local market taxonomies can be a spur to increased issuance. Which emerging markets are you watching in this regard?
BB: We’re tracking more than 50 taxonomies globally that are in various stages of development. They’re very important to the sustainable debt markets: about a third of the SPOs that we look at have some project selection criteria borrowed from a taxonomy. However, I’m not sure whether or not they spur issuance – that’s more to do with overall market conditions and the challenges for issuers to fully meet taxonomy criteria. The reference case in emerging markets has really been China: they’ve had their green bond catalogue for a long time, and they updated that in October last year. A lot of issuance is related to that catalogue.
APAC, in general, has been a hive of activity for taxonomies. We recently launched the ability to look at taxonomy alignment with some of these APAC taxonomies, such as China’s, Singapore’s and the Common Ground Taxonomy, produced jointly with the EU, as well as taxonomies from Brazil, Chile, Colombia and Mexico. We’re responding as an SPO provider to this increased interest in taxonomies by issuers by being able to offer alignment assessments, and at the same time, providing a global view for investors with our Shades of Green approach.
EF: How do sustainable bond investors look at emerging markets issuance? What considerations are front and centre?
BB: Big picture, there’s a recognition that global greenhouse gas (GHG) emissions growth is going to come from the emerging markets, and that investors’ sustainability strategies need to tackle this. This is creating appetite among investors for bonds that deliver impact in terms of reducing emissions in developing economies.
We’ve seen a number of investor-led initiatives to support this, such as the Methane Abatement Guidance. That was launched last year and is intended to help spur sustainable issuance from national oil companies, particularly in emerging markets, which are typically large debt issuers. It aims to give a bit more assurance and credibility to that market and address greenwashing fears.
There’s a recognition that global emissions growth is going to come from the emerging markets, and that investors’ sustainability strategies need to tackle it
We’ve also seen that some sustainable bond issuances linked to Paris Agreement Nationally Determined Contributions (NDCs). Recent examples include SPOs we’ve produced for Cameroon and Rwanda, who have been trying to tie their sovereign sustainable bond issuance to delivering on their NDCs. That’s been seen quite favourably by investors who are looking to get impact from those bonds.
Currency also really matters for a lot of these markets. It works both ways. Some local emerging market investors are looking to hold assets in their local currency, while some issuers look to issue in dollars, euros or Swiss francs to help attract foreign capital and investors. To give an example, Metro de Santiago has issued a number of green bonds in Swiss francs. Conversely, in China, there are large volumes of green bonds issued in renminbi, given the large domestic investor base. Issuing in the local currency enables issuers to avoid the foreign currency risk created by issuing in offshore markets.
EF: Every market is different, but emerging markets are, if anything, even more idiosyncratic than developed markets. How does your Shades of Green methodology capture these differing local contexts when grading sustainable bonds?
RJ: Our Shades of Green analysis includes a specific ‘jurisdiction’ component. To assess that, we rely on local and regional analysts to capture the nuances of the local context. In assessing social projects, almost 100% of the analysis is understanding that context. But it is also a big component of analysing green projects, especially for countries that have a very different transition context than, let’s say, European nations.
A large element of the analysis is understanding how the technologies involved play a role in the pace of the transition. For example, hybrid vehicles would not be considered as green in many Scandinavian nations. But, in developing countries that lack the infrastructure for electric vehicles, they are likely to be assessed as Light Green in our methodology. Similarly, investing in new landfills is a no-go in most developed countries. However, in developing countries that still rely on illegal dumping, landfills are an important step towards improving recycling rates.
EF: What are the key trends you’re watching in 2026?
RJ: We expect transition finance to be a theme globally, including in emerging markets. Many emerging markets still rely heavily on fossil fuels. In those countries, there are often large, quasi-sovereign public entities active in oil and other hard-to-abate sectors. Historically, the sustainable bond markets haven’t tackled those entities – and a transition label starts to speak to investible opportunities there.
Just this month, we have launched our analytical approach to providing SPOs for transition alignment. This update is in response to the launch of the ICMA Climate Transition Bond Guidelines and the loan market associations’ Guide to Transition Loans. The launch of these guidelines marks a meaningful evolution in the market, establishing ‘transition’ as a standalone label differentiated from ‘green’. For emerging markets dependent on hard-to-abate sectors, this could be an important new development and label to enable access to finance. Transition finance is set to become a big part of the story in terms of tackling global emissions, and we want to help bring rigour and credibility to this part of the market.
Beth Burks and Rafael Janequine are both directors in sustainable finance at S&P Global Ratings, in London and São Paulo, respectively.
For more information, see: www.spglobal.com/ratings/en/ products/second-party-opinions