Sustainability

The infrastructure of net zero: grid investments, EuGB momentum and green real estate

Listen to our latest Deep Dive in 5 podcast with James Boast as he explores how sustainable finance can become more practical and accessible for a wider range of businesses, through clearer guidance, workable sustainability-linked loan targets, and better ways to support companies driving positive environmental and social impact.

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Primary Capital Markets

Grid infrastructure remains one of the most significant drivers of European corporate green bond issuance as utilities accelerate spending to support renewable energy integration

ENGIE EUR 750m Green Hybrid: ENGIE successfully priced a EUR 750m green hybrid bond, with proceeds supporting the acquisition of UK Power Networks, further highlighting how network and grid-related assets continue to underpin a growing proportion of labelled utility financing activity.

The European Green Bond (EuGB) gains steady momentum among corporate issuers, also outside of utilities

TenneT Germany second EuGB: TenneT Germany returned with its second EuGB following its inaugural issuance earlier this year, giving investors a fully EU Taxonomy-aligned green debt curve across maturities from corporate issuer the EuGB format.
Philips EUR 650m inaugural EuGB: Philips entered the market with a EUR 650m inaugural European Green Bond financing circular-economy activities that are 100% EU Taxonomy aligned, demonstrating growing corporate confidence in the new standard.

Real estate is re-emerging as a meaningful source of green bond supply, led by renewed activity from European issuers

Sagax AB SEK 3bn green bond: Swedish property company Sagax raised SEK 3bn across four green bond tranches in a single day, highlighting strong demand from Nordic investors and part of a broader reopening of the Nordic real estate bond market, with multiple issuers pricing successfully in the same two-week window. The transaction demonstrates renewed confidence in both the sector and labelled debt markets following a prolonged period of muted issuance.
Klépierre dual-currency green bond issuance: Klépierre raised EUR 500m through a benchmark green bond before returning with a HKD 550m green transaction two weeks later, underscoring growing efforts by real estate issuers to diversify funding sources and access sustainable capital pools beyond Europe.

ESG Ratings and Data

ESG Ratings supervisory regime should make ratings more transparent and accessible for corporate issuers

Effective from 2 July 2026, all EU ESG rating providers will need to be authorised by the European Securities and Markets Authority (ESMA), impacting issuers whose ESG performance is assessed by external providers.

The Regulation emphasises transparency by requiring providers to disclose methodological details and obtain ESMA approval. An initial list of approved ESG rating providers has been announced.

While the Regulation does not directly impact issuers, providers are likely to strengthen data-validation and documentation processes, with issuers likely to receive more requests for information, underscoring the importance for companies to engage proactively with relevant providers and understand the impact on market access and reputation.

Investors

Investor preferences in nature-related debt investments

Nature-related debt investments are growing, with a fivefold increase from USD 3bn in 2016 to USD 14bn in 2025. These investments have been primarily focused on forestry and agriculture-related investments.

Pension funds are looking for projects that are repeatable and have strong risk-management credentials such as long-term contracted demand, robust regulatory frameworks and potential for a developer to diversify revenue sources. Bankable financing structures that balance debt and equity helps share risk and attracts sustained investor interest over the long term.

UK slows in green bond fund uptake

Investors for Purpose, along with five UK institutional investors have noted slowdown in adoption of dedicated green bond funds at scale in the UK. Investors called for stronger, more consistent audit and reporting standards that go beyond emissions to include community benefits and resilience.

Product Developments

Loan Market Association (LMA) publishes its Practice Note for the assessment of pure play companies

The LMA, alongside the Asia Pacific Loan Market Association and Loan Syndications and Trading Association, has published a Practice Note, which outlines a practical framework for assessing companies whose business activities are primarily focused on environmental or social objectives. This Practice Note does not create a new loan label or amend existing principles, but outlines:

Clear eligibility: where at least 90% of revenue, assets, or another relevant metric is linked to eligible green or social activities.
Flexible assessment metrics: revenue, assets, or alternative metrics can be used depending on a company’s business model and maturity.
Strong sustainability safeguards: companies must demonstrate absence of significant harm and ensure non-eligible activities do not conflict with pure play status.
Annual review requirements: ongoing disclosure and yearly reassessments are required over the life of a transaction.

Nature & Carbon Markets

European Commission releases proposed EU Emissions Trading System (ETS) reforms

Launching an Industrial Decarbonisation Bank valued at EUR 100bn. Starting with an Investment Booster backed by EUR 400m EU Allowances to provide transition finance from 2027, to be moved to a Contracts for Difference (CfD) model from 2031.
Inclusion of international carbon credits (up to 2% of ETS cap) into the EU-ETS from 2036.
Integration of 250 million tonnes of permanent domestic carbon removals into the EU-ETS, from 2031.
Inclusion of international flights landing within a 5,000km range into the EU-ETS. Read more

Government response to independent review on Greenhouse Gas Removals (GGRs)

UK Government has highlighted the integration of GGRs into the UK ETS will occur as soon as it is practicable, supporting a long-term demand signal for removals. The UK-ETS raised revenues of GBP 2.4bn from UK Allowances (UKAs) in 2025, with power, industrial and aviation sectors mandated to purchase UKAs. Read more

More Sustainability articles

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