ESG-Labeled Bond Issuance Expected to Increase Amid Rising Demand from Utilities and Data Centers

In the first half of 2025, bond issuance tied to environmental, social, and governance (ESG) purposes decreased following a strong performance in late 2024. However, issuance is anticipated to rise, driven by new market entrants from Austria, Sweden, and Spain, which together contributed over 5% of global ESG-labeled bond issuance year to date.

Utilities have been a significant sector, averaging 9% of annual ESG issuance from 2018 to 2024. The demand for energy from expanding data centers is expected to boost capital expenditures (capex) for utilities, leading to increased ESG-labeled bond issuance. This trend is supported by the diversification of financing sources, the need for reliable energy supplies, and the integration of renewable energy alongside natural gas to minimize environmental impact.